tax deductible in backyard & kitchen maintenance fee on IP

[JohnHenry]

Hi folks,

I have just signed a contract for the renovation in my investment property to rebuild the backyard (new tile with some landscaping replacement) and the kitchen makeover (stove replacement).

So in this case which component I can tax deduct for this financial year ?

 

[coastymike]

Sounds like an improvement not a repair so deductible as depreciation or a capital allowance over the useful life outlined by the commissioner.

 

[vaughan]

Stove replacement will likely be a repair as long as it is like-for-like.

 

[dan c]

Without knowing all the details, a 'makeover' would more likely be an improvement, rather than a replacement. So the expenditure would need to be depreciated, rather than claimed 100% as a rental expense.

 

[Rob G.]

Stove replacement will likely be a repair as long as it is like-for-like.

Nope.

The stove itself is the relevant asset and it is no longer.

A balancing adjustment and a new capital asset to start depreciating ... unless a rollover for loss or destruction of a depreciating asset.

 

[coastymike]

Quite amazing the number of people who think a like for like replacement is a repair.

Taxation Ruling TR 92/3 Income Tax : Deduction for Repairs states that

15. Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes (whether expected or unexpected) during the passage of time.

A replacement is not a repair. You must look at the asset and what has been done to the entirety of the asset. If a stove is replaced then the entire asset has been replaced. It hasnt been repaired.

 

[Rob G.]

Lindsay v FC of T (1961) 106 CLR 377

Affirmed by the Full High Court.

 

[JohnHenry]

Stove replacement will likely be a repair as long as it is like-for-like.

Well, this is a new model replacement since the old one is no longer in stock.
but in the invoice the tradesman split the invoice as follows:

2 hrs x $ 100 labour
1 unit gas stove x $ 370

so does this means I can tax deduct the $200 labour and the stove $370 added into the depreciation report for this FY ?

 

[vaughan]

Well, this is a new model replacement since the old one is no longer in stock.
but in the invoice the tradesman split the invoice as follows:

2 hrs x $ 100 labour
1 unit gas stove x $ 370

so does this means I can tax deduct the $200 labour and the stove $370 added into the depreciation report for this FY ?

No. (I was incorrect about the stove being deductible.) It could probably go into the low value pool though and be depreciated faster.

 

[Rob G.]

Well, this is a new model replacement since the old one is no longer in stock.
but in the invoice the tradesman split the invoice as follows:

2 hrs x $ 100 labour
1 unit gas stove x $ 370

so does this means I can tax deduct the $200 labour and the stove $370 added into the depreciation report for this FY ?

Labour may in part be referrable to the decommissioning and disposal of the old stove and is added to that cost for a balancing adjustment. I assume you have the adjustable value for the old one.

Mostly it will relate to the installation of the new stove and is part of the cost for depreciation.

However, alterations to the building to accommodate the stove (including new fixed wiring) may be capital works and written off over 40 years.