i have just purchased a property that i intend to rent out long term. It requires substantial renovation ( new kitchen and bathrooms, timber flooring , landscaping, painting etc) in order to obtain a reasonable rent. can anyone advise on the best renovation strategy, that is do i do certain works now and delay others. what will be able to be deprecaited versus added to the cost base of the property( and therefore of no use until i sell the property) . would really appreciate any advise
Possibly the best way to view this sort of work is as a ‘renovation’. And the cost of renovations can be depreciated. It’s been a bit of a grey area, so I did some research for my own knowledge. Work that you do after purchase and prior to renting the property out can essentially be depreciated. Naturally, it can’t be claimed as repairs/maintenance.
Upon sale of the property, the undeducted portion of the reno i.e. anything you haven’t claimed yet, may be added to the cost base. Need to check with an accountant on this one, as I’m not 100% sure – it’s accountant territory.
Delaying some work for a while would help to spread the costs, but the work could not be claimed as repairs unless it was to rectify damage caused by your tenants i.e. it can’t rectify damage that existed at the time of purchase. Yes, this is where things get really grey.
I did a seminar last for the Somersoft gang in Sydney and had references to some ATO decisions regarding ‘Initial Repairs’. If you (or anyone else) send me an e-mail I’ll send you a copy of the presentation.
ScottTax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auMe again.
Of course, when you do the reno, you need to put a value on the things you’re tossing out (The ATO term is ‘disposal’) so you can claim them.
If the stove is worth $350 and you toss it out, there’s a deduction of $350 sitting in a mini skip.
Same for carpet, blinds etc.
As an aside, for who have owned a rental property for a year or two where they are thinking of ripping up the carpets and polishing the floors. Did you know that can legitimately be claimed as a repair? There’s an ATO ID on this.
Scott
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.au
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