Tax question on repairs/renovations

[poordeveloper]

Hey all,

A relative passed away recently leaving me their PPOR. I will use it as an IP although it needs some renovation and repairs. The property won't be transferred to me for several months however I do currently have full access.

If I undertake some of the repairs and renovations prior to the settlement of the estate, will I be able to claim these as deductions/depreciation once the property is tenanted?

thanks,
pd

 

[Aimjoy]

A relative passed away recently

Sorry to hear that - my condolences.

leaving me their PPOR

Why don't I have relos like that?....happy days

I will use it as an IP although it needs some renovation and repairs. The property won't be transferred to me for several months however I do currently have full access.
If I undertake some of the repairs and renovations prior to the settlement of the estate, will I be able to claim these as deductions/depreciation once the property is tenanted?

Well pd,

The renos and repairs will be added to the cost base, since the property has not been tenanted before. If you borrow money for the renos/repairs then the interest will not be deducible until the property becomes available for rent.

You will need to get a QS to do a depreciation schedule for you. If the house is under 40 years old there will be some building depreciation to be claimed. If it is over that, then probably only your reno/repair job will be depreciable depending on how much you spend and on what.

Good news is that, presumably this property will be mortgage free? If so you can borrow against the equity to uses as deposits on more IPs or shares etc and the interest will be tax deducible.

Seek an accountant's advice first.

All the best with it and your future investing.

Aimjoy

 

[marg4000]

Be sure to have the property valued.
This will form the cost base for future CGT calculations.
Marg

 

[poordeveloper]

Thanks for the replies Aimjoy and Marg.

I'll be getting the property valued upon transfer into my name. Just to clarify, will the repairs or renos still form part of the cost base even if they are done before the property is transferred into my name?

regards,

pd

 

[handyandy]

Based on the other comments I would not worry about the deductions/depreciation and get it in as part of the cost base quick smart.

You will stand to gain greatly in any future CGT situation.

To ensure that you actually lift the base value I would imagine you will need to tackle the kitchen/ bathroom and a paint throughout and maybe new carpets. In a 2 month time frame you are going to be busy.

Cheers

PS you can still get a depreciation schedule later