Property investors often worry about ongoing repairs and maintenance
costs however these concerns can often be reduced by claiming back these costs
when completing a tax return.
Before claiming
deductions, it is necessary for investors to understand the difference between
claiming repairs and maintenance vs. capital improvements.
Repairs
The Australian
Taxation Office (ATO) defines repairs as work completed to fix damage or
deterioration of a property, for example replacing part of a damaged fence.
A deduction cost
paid to repair a rental property can be claimed as an immediate 100% deduction
in the year the expense is incurred.
Maintenance
Maintenance is defined
as work completed to prevent deterioration to a property, for example mowing
the lawns.
Costs for maintenance of a rental property can also be claimed as an immediate
deduction in the year the expense is paid.
Capital improvements
Improving the
condition or value of an item beyond its original state at the time of purchase
is defined as a capital improvement.
These are
classified as either capital works deductions or plant and equipment and must
be depreciated over time.
Capital works
deductions include renovations such as adding an internal wall and also
includes items which cannot easily be removed from the property.
Plant and equipment
items include removable items such as carpet and hot water systems.
Friday, 26 February 2016
