Hello,
We are planning on renting out our current home and moving into a bigger home. There are a few repairs/renovations that need to be done , i.e. Retile the bathroom walls, change the Kitchen stove, etc.My question is are these renovations tax deductible and if so at what point in time can we claim them? If we do these modifications while we are currently living in the home, they would not be tax deductible. So what criteria would the ATO require in order to make it tax deductible?
Any advice is appreciated.
Thanks.
Unfortunately the renos are as a result of you living in the home and therefore are not claimable against the future rental income of the IP.
Money spent in bringing the property ‘up to scratch’ – ie a rentable standard – would be taken into account when determining any capital gains that would be taxable when you eventually dispose of the property.
How is the money recouped? The repairs should improve its current market value. This higher value is not taxable (due to POPR exemptions) and therefore goes to minimise the value that would attract a capital gains tax in the future. (Unless of course the property was purchased before Sept 1985 in which case none of the eventual gain would be taxable)
Scheldon,
Repairs made once the tenant has moved in but that had became necessary while you were living there are fully deductible IT2587.
The stove if freestanding is plant and equipment so has to be depreciated over its effective life. Accordingly, it won’t make much difference when you buy it.
Improvements as opposed to repairs will not be deductible though they may qualify for building depreciation. I suggest you down load the rental property booklet off http://www.bantacs.com.au for full details of the difference between repairs and improvementsJulia
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