I have an old rusty roof on an IP that is currently leaking internally in a number of spots. The whole roof needs replacing according to a couple of roofers I've had out there. Can I deduct this cost or does it have to be depreciated? My understanding is that a small repair can be deducted but generally not an entire roof replacement. However there would be no capital improvements as it is a skillion roof that can't be seen from the ground so I think it should be deductible...?
Roof replacement
- Thread starter grantwhit
- Start date
Patch repairs = deductible. Straight forward.
TR 97/23 http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/nat/ato/00001 addresses the issue of what is deductible, non-deductible, capital or building works. And then it leaves you confused.
On the face of it replacing the entirety of a steel roof might be capital expenditure and non-deductible. Para 18 is a guide and it suggests you seek Private Ruling to be certain. Some arguments to support your view and the key issue in the TR could include:
- The roof is only part of the building hence "entirety" is not satisfied. See para 37-42
- Can there be a part repair and part is replacement ? At same time ?? Yes see Para 57. But needs to be clearly ascertained. This suggests the quote can be influenced so that bulk of cost is repair and trivial portion = replacement so that total costs is he cheaper quote to replace it all
- A full replacement is cheaper than part since sheets overlap. So it might be cheaper to replace whole than repair even 50%.
- Photo's
- Identical or substantially alike materials. For example corro sheets = colorbond panels or sheets. Glass panels / skylight = No.
- Any partial replacement of timber
- Renewal of all fittings (ie screws/ clips etc) due to rust would otherwise be essential repairs. My offices needed a portion of 30% sheets replaced plus all sheets refixed using new screws. That = deductible.
- Estimates of actual sheets damaged requiring repair as % of total
- Quotes...If a quote to repair 30% = full replacement demonstrate this.
Also wording of final invoice AND quote might support or harm arguements but the actual work performed should guide you. If it says instal and replace roofing sheets thats not as effective as "repairs to roof sheeting to address leakage etc". Dont fall for the old trick of final invoice saying one thing and quote another. And a invoice that says repair when you replaced a whole roof might be a fraud.
The issue of depreciation falls best on our qty survey experts. I rely on their view and its complex at times. My view is roofing = fixed part of the building and is eligible construction expediture eligible for capital allowance of 2.5% pa.
TR 97/23 http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/nat/ato/00001 addresses the issue of what is deductible, non-deductible, capital or building works. And then it leaves you confused.
On the face of it replacing the entirety of a steel roof might be capital expenditure and non-deductible. Para 18 is a guide and it suggests you seek Private Ruling to be certain. Some arguments to support your view and the key issue in the TR could include:
- The roof is only part of the building hence "entirety" is not satisfied. See para 37-42
- Can there be a part repair and part is replacement ? At same time ?? Yes see Para 57. But needs to be clearly ascertained. This suggests the quote can be influenced so that bulk of cost is repair and trivial portion = replacement so that total costs is he cheaper quote to replace it all
- A full replacement is cheaper than part since sheets overlap. So it might be cheaper to replace whole than repair even 50%.
- Photo's
- Identical or substantially alike materials. For example corro sheets = colorbond panels or sheets. Glass panels / skylight = No.
- Any partial replacement of timber
- Renewal of all fittings (ie screws/ clips etc) due to rust would otherwise be essential repairs. My offices needed a portion of 30% sheets replaced plus all sheets refixed using new screws. That = deductible.
- Estimates of actual sheets damaged requiring repair as % of total
- Quotes...If a quote to repair 30% = full replacement demonstrate this.
Also wording of final invoice AND quote might support or harm arguements but the actual work performed should guide you. If it says instal and replace roofing sheets thats not as effective as "repairs to roof sheeting to address leakage etc". Dont fall for the old trick of final invoice saying one thing and quote another. And a invoice that says repair when you replaced a whole roof might be a fraud.
The issue of depreciation falls best on our qty survey experts. I rely on their view and its complex at times. My view is roofing = fixed part of the building and is eligible construction expediture eligible for capital allowance of 2.5% pa.
The condition of the roof when you aquired the asset will play a big part in the deduct vs depreciate issue.
If it was old and rusty when you bought it, then a replacement will improve and then be a capital cost. If the roof was brand new when you bought it 40 years ago, then repair may come into play as you are restoring it to its condition at purchase.
If it was old and rusty when you bought it, then a replacement will improve and then be a capital cost. If the roof was brand new when you bought it 40 years ago, then repair may come into play as you are restoring it to its condition at purchase.
Nope.
Its your commercial decision whether to keep making tax deductible patches considering that a non-tax deductible capital improvement will reduce future repair costs.
You can't have a deduction for a repair you did not perform ... exactly as per Western Suburbs case if you read it.
Better get some advice specific to your facts because small details make big tax impacts.
and here is a private ruling where the replacement of a roof is considered to be a repair
http://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1011303858170.htm
http://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1011303858170.htm
Mike,
The ruling is short on facts.
It states that the roof was in good shape and used for an extensive period before sustaining damage.
Kitto J. in the High Court determined that the replacement of a ceiling was a major and important part of the structure, and giving advantages over the old one in reducing the likelihood of future repair bills.
A complicating factor was the use of a more modern and suitable material, combined with a whole new supporting structure since the old one was dangerous.
Much depends upon its own facts. All we have been given in this thread is that somebody wants to replace a leaky rusting roof. No history or detail is provided.
Cheers,
Rob
Hi all thanks for the responses. I haven't had a chance to read through the links yet but I will get to them. The roof is probably 25 yrs old. The problem is that the roof (circa 1940 installation) was never removed so capillary action between the two surfaces has caused significant rust. I've patched it up again for now and it should do for a little while yet. I don't really have the money to replace the whole thing so I would only do so if I could guarantee that it is deductible.
