Rennovate Before tenant moves in or After?

Hello BorisS, hope this helps.

Expenditure to remedy wear or damage in existence at the date of acquisition (initial repairs)

(see explanations at paragraphs 68 to 78 and examples at paragraphs 115 to 119 of this Ruling)

27. Expenditure incurred on initial repairs of newly or recently acquired premises, plant, etc, where the expenditure is incurred in remedying defects in existence at the date of acquisition, is expenditure of a capital nature and is not, therefore, deductible under subsection 53(1). It is not deductible even though the repairs are carried out shortly after the premises, plant, etc are acquired. The costs of effecting initial repairs are still not deductible even if some income happens to be earned before the repair expenditure is incurred.

28. The main consideration here is the condition of the premises, plant, etc when it is acquired. Whether at the time of acquisition the taxpayer was aware of the condition of the property, including its need for repair, and whether the purchase price reflected the need for repairs, are immaterial. We consider that the English Court of Appeal decision in Odeon Associated Theatres v. Jones (Inspector of Taxes) (1972) 1 All ER 681 is not authority in Australia for a contrary view. An initial repair expense is capital in nature. It is not the type of repair expenditure ordinarily incurred as a working expense in producing assessable income or in carrying on a business. This is because it lacks a connection with the conduct or operations of the taxpayer that produce the taxpayer’s assessable income. It is essentially an additional cost of acquiring the property. It is not deductible under subsection 53(1).

29. An initial repair expense may not be dissected or apportioned to allow a deduction of some part of the expense that may be said to remedy defects arising from the use of the premises, plant, etc by the taxpayer after it was acquired. Subsection 53(3) does not provide for any such dissection or apportionment.