Tax on Rental income

[fATICAN]

rental tax

Thanks for all your comments...

If Repair brings something back (restores) to original conditon..
then restoring a fireplace -
(un-bricking..unclogging...sweeping), should be classed as a repair....yes?

sorry to labour the point.

 

[Perp]

If Repair brings something back (restores) to original conditon..
then restoring a fireplace -
(un-bricking..unclogging...sweeping), should be classed as a repair....yes?

sorry to labour the point.

Nah, that's an improvement, because being bricked up was a deliberate decision to change the property's qualities; not due to "wear and tear".

Unclogging alone, yes... that's maintenance.

Removing the bricks to restore the fireplace - improvement.

 

[skater]

If Repair brings something back (restores) to original conditon..
then restoring a fireplace -
(un-bricking..unclogging...sweeping), should be classed as a repair....yes?

.

Good try.

Usually a repair means bringing it back to the condition it was in when you bought it.

When you bought the place did it have a nice smik restored fireplace??

Hmm.....didn't think so. So, then, it is an improvement.

 

[wylie]

My understanding is that whichever category ("repair" or "improvement") that work done to the property falls into, ultimately it all evens out in the final wash up.

By that, I mean that one method puts more money in your pocket annually, and the other method means more money at the point when you sell. Is that roughly right?

My IPs are fairly simple. I tell the account something like "We replaced the broken sewer line with new poly pipe and the plumbing fee was $XXX". I leave it up to him to place that either as a "repair" or an "improvement" but have always thought that either way, on sale, it sort of all evens out. In other words, if I have been getting a higher "return" one way, I lose out at sale, and vice versa.....

(That was rather muddled.... but I know what I am trying to say.... I think .)

Someone might be able to translate what I am trying to say into English!!

 

[tobe]

Right, so the fireplace is an improvement, and getting the builder to replace the stumps and re do the floor, and take out the leaning chimney in my Ip is also an improvement, becuase I bought the place with sloapy floors and a leaning chimney, but, if I borrow the money to do the improvements, I can claim the depreciation on the improvements, and the interest on the loan to improve the property. Its not as good as it would be if it were classed as a repair, but its still pretty good, especially as I can charge more rent.

 

[tobe]

and claim the increased interest on the loan every year, not just the year the work was carried out.

 

[Perp]

Right, so the fireplace is an improvement, and getting the builder to replace the stumps and re do the floor, and take out the leaning chimney in my Ip is also an improvement, becuase I bought the place with sloapy floors and a leaning chimney, but, if I borrow the money to do the improvements, I can claim the depreciation on the improvements, and the interest on the loan to improve the property. Its not as good as it would be if it were classed as a repair, but its still pretty good, especially as I can charge more rent.

You may get away with replacing the stumps as a repair, if you replace "like with like", eg timber stumps of a certain height with new timber stumps of a comparable height. But yes, the rest sounds like improvements.

 

[fATICAN]

rental tax

Thanks all, the property was inherited...i agree to the premise - that you may lose one way and gain the other..

I went out and borrowed some books from the
Library..rental /tax/investment...one by a Margaret Lomas looks interesting-
'' How to maximise your property portfolio''....i'll let you all know what i think of it..

cheers

 

[fATICAN]

rental/tax

Ok..the book by Mrs. Lomas is good..it covers multiple property portfolio scenarios & emphasises finding positive cash flow properties...a good read.

Also picked up : Taxation pocket guide by Jimmy B. Prince
for Australian property investors..covers tax laws..
and, Rental property & Taxation by Tony Compton..more of the same..

All very exciting reading...for wintery nights...haha..

 

[quoll]

Your on your way, if you start to read this sort of stuff AND find it interesting, your heading in the right direction.

Congrads

Graeme