I have recently purchased my first property which will be my PPOR for next 6-10 months. At the moment I planning on renovating the bathroom and kitchen aprox 10-15k worth of works, and some other minor work – lay down new lino, polish boards, painting, decking etc another 5k. I would prefer to do these works sooner rather than later.
Deductible – When the place becomes Ip?
Would the ATO look at these works as improvements, and then I can depreciate. What are your thoughts/opinions.
Cheerio
BartBart,
The basic rule is if these renos improve the property beyond the state it was in when you purchased it no tax deduction will be available. There are some small exceptions: Structual improvements, kitchen benches etc can be depreciated at 2.5% prime rate per year. If you replace the stove or hot water system they can be depreciated over 12 years, Vinyl over 10 years. ID 2002/330 may allow you a deduction for ripping up the carpets and polishing the floor boards but this should not be done until the property is rented out. The painting is not going to be deductible unless it didn’t need painting when you purchased it. As long as the painting became necessary during the time you owned it and you don’t paint it until you rent it out you will get a tax deduction.
Also Section 118-192 will reset the your cost base for CGT purposes to the market value when you first rented it out if it has only been your main residence before that date.
More detail is available in my rental property booklet, a free download off my web site.Julia Hartman
[email protected]
http://www.bantacs.com.au
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