All Topics / Help Needed! / Renos – before or after renting IP out?

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  • Profile photo of waynel2waynel2
    Member
    @waynel2
    Join Date: 2004
    Post Count: 311
    July 16, 2004 - 3:31 am

    Hi Guys,

    I’ve just had an offer on a 4×2 in Merriwa accepted. I’m planning to move into the property for about 2-3 months and renovate it before I rent it out – as it needs a bit of work before it’s rentable.

    Question, if I do the renovations prior to renting the property – will I be able to claim these renos against my tax?

    I heard that if you do renovations on a property while the tenant isn’t in there then you can’t claim these against your tax?

    Please advise.

    Thanks

    Wayne

    Wayne Leech

    *Below are links to my websites – any feedback, comments would be appreciated:)
    http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
    http://www.homesearcher.com.au – List your property for FREE (Private sellers only)

    Profile photo of yackyack
    Member
    @yack
    Join Date: 2003
    Post Count: 1,206
    July 16, 2004 - 3:43 am

    As you just bought the property, regardless of whether you have tenants or not, if you do major renovations these are capital costs and cannot be deducted against your income.

    But you can claim depreciation/building allowance on these costs.

    Profile photo of waynel2waynel2
    Member
    @waynel2
    Join Date: 2004
    Post Count: 311
    July 16, 2004 - 3:50 am

    thanks yack,

    These renos are mainly cosmetics – and such things as installing AC, putting up a pergola, brick paving and so on…

    Wayne Leech

    *Below are links to my websites – any feedback, comments would be appreciated:)
    http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
    http://www.homesearcher.com.au – List your property for FREE (Private sellers only)

    Profile photo of depreciatordepreciator
    Member
    @depreciator
    Join Date: 2003
    Post Count: 541
    July 16, 2004 - 4:22 am

    Wayne,
    It’s tricky. Have a look at the first thread in the Accounting forum on paint. It’s the same issue and a couple of accountants responded.

    Profile photo of BarnseyBarnsey
    Participant
    @barnsey
    Join Date: 2004
    Post Count: 70
    July 16, 2004 - 11:48 pm

    Hi Wayne

    Based on the info given – here is what I may do if I were in your situation.
    Do the bare minimum of work to get the property habitable & rent it out for 12 months. This may leave you CF- or CFn but if its -ve the you get the tax break. After the year is up you can then do the renos & by the sound of it most will be deductible. If you rent out your IP first, then there should be no doubt (for the ATO) that its repair rather than improvement. You may come unstuck with the paving/pergola/ac unless you’re replacing existing items.
    That’s my take on it, but I’m no expert. I would have to talk to an accountant to check the facts.

    Regards

    Patrick

    The dumbest question is the one you don’t ask.

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