Linda Difference between repairs, maintenance and improvements article fyi

Hello Friends, Clients & Associates,

The following is for your perusal and information only:-

Difference between repairs, maintenance and improvements

It’s a common question among new property investors: “What’s the difference between repairs, maintenance and improvements?”

This is important stuff to know if you’re going to invest in property because it affects your tax deductibility and hence your cash flow.

Many landlords forget about the new tap or roof repair that they can claim a tax benefit for because their primary focus is on rental returns and capital gains. But it’s the smaller things that can add up to a big tax advantage if you document every item. So the first thing to do is understand the difference between them.

1. A repairis usually partial and restores something to its original state eg. repairing part of a fence by replacing two palings

2. Maintenance is work that prevents deterioration or fixes current deterioration eg. painting your property or oiling the garage door

Repairs and maintenance must relate directly to wear and tear or damage that occurred due to renting out your property. The ATO provides the following examples of repairs and maintenance for which you can claim an immediate deduction in the same year.

  • Gardening and lawn mowing
  • Cleaning
  • Pest control
  • Servicing a water heater
  • Replacing guttering damaged in a storm
  • Replacing part of a fence due to a fallen tree

3. An improvement makes something better than it was originally or provides something in a new and more valuable or desirable form. They generally improve the property’s income production or expected life. A repair becomes an improvement when you go beyond simply restoring an item to its original function. For example, if you replace a worn paling fence with a brick fence, you are going beyond simply repairing the fence – you are improving the fence with a better material

The ATO provides the following examples of improvements.

  • A new stove
  • New kitchen cupboards
  • Building a garage or carport
  • Removing or adding an internal wall

The differing tax benefits between a repair, maintenance and improvements

Generally speaking, you can claim an immediate deduction for repairs and maintenance in the same financial year, as long as your property is being rented out

Generally speaking, you can claim a capital works deduction or a deduction for decline in value (depreciation) over a number of years for improvements

The ATO provides the following examples as to which improvements should be depreciated and which ones attract a capital works deduction.

Depreciation deduction

  • Ceiling fan (depreciated over 5 years)
  • Carpet (10 years)
  • Floating timber floors (15 years)
  • Hot water system (12 years)
  • Window curtains (6 years)
  • Dishwasher (10 years)
  • Air conditioner (20 years)

Capital works deduction

  • Fixed floor coverings, such as tiles and vinyl
  • Grease traps
  • Hand rails
  • Ducts, pipes, vents
  • Shutters
  • Wardrobes

Important note for new investors

When you buy an investment property, there are often items that need repairing before you can lease the property out. The ATO has a name for this – they’re called ‘initial repairs’. They are not deductible. Instead, they are considered part of the acquisition costs of the property and may be included in the capital gains tax cost base.

All the information above is general in nature. Use it as a guide only. As with most tax stuff, it’s important to get professional advice. Speak to your accountant regarding individual repairs or improvements and get a quantity surveyor to take stock of all the items in your property that are depreciable.

If you haven’t been monitoring your repairs, maintenance and improvement expenses, you might be missing out on thousands of dollars in tax benefits!

Published: Wednesday, November 21, 2012

Best regards,

Linda and Carlos Debello

Confidential email:- The information in this message is intended for the recipient name on this email. If you are not the recipient please do not read, copy distribute or act upon the message as the information it contains may be privileged. If you have received this message in error, please notify the writer by return email. Thank you very much for your assistance in this matter and your co-operation.

About ljgrealestate 据联大

Removing the Hassle from Sales and Rentals across South East Queensland. Aim to Empower other like minded Property Investors. LJ Gilland Real Estate Pty Ltd LREA推荐书LJ Gilland房地产 L J Gilland Real Estate is a prestigious boutique agency specializing in Property Investment Management Services and the Sales of Investment Properties with tenants in place. Comprised of a top performing group of handpicked specialists, our Agents proudly serve Property Investors in Queensland. Since 1996 our Agency has demonstrated a genuine enjoyment of working with people, developing long-term relationships and delivering on the promise of great service. Carlos and Linda Debello offer property investor's the confidence to sell and lease in any market. We provide comprehensive market appraisals, exclusive multimedia marketing campaigns, and knowledgeable, highly personalized counsel on all aspects of real estate. Our Property Management Team is equally considerate, offering investors with in-depth advise, well-researched rental valuations, and highly professional rental management services. Carlos’ direct mobiles are 0400 833 800 & 0413560808. Linda’s mobiles are 0409995578 & 0414978700 (prefer email contact for Linda). Office 07 3263 6085.
This entry was posted in Uncategorized. Bookmark the permalink.