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Taxation - Deduction of repair costs
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haroldo
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30/10/2017 - 4:59 pm
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Hi there,

I have a rental property in Sydney and I live a frugal life in a cheaper country from rental income. When tenants recently vacated the premises major repairs were required before the property could be occupied. These were done post haste and the final bill for painting walls, replacement of damaged carpet, kitchen doors, bathroom vanity, broken tiles, mirrors, a window etc came to $7,800.

The income I will receive for this financial year is minimal, and I doubt very much that I will actually achieve an assessable income great enough to break through the threshold.

I read an ATO document ‘Rental-properties-2017’ and my understanding is that I should claim this amount as a deduction within the taxation year that the costs were incurred. Is my thinking correct?

Any and all assistance will be greatly appreciated.

Thanks in advance.

Haroldo

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scotlandx
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30/10/2017 - 8:49 pm
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If you are not sure you should seek advice from a qualified person who will take into account your specific circumstances.

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Missy
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02/11/2017 - 12:41 am
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Hi, I am a tax accountant and can tell you:

As a general rule, if the intention was a repair and the replacement was of a similar type (ie replacing lino with lino, not replace lino with timber floor boards) then it will normally be an out right deduction for the items you list.

What would not be out rightly deductible would be replacing the roof.  Even if it got damaged and the decision was to replace the entire roof, then the cost was have to be depreciated as a capital cost.  You still get a tax deduction for the cost out layed, but over many years.  

As a side note and strata related.  If there is a special levy raised (no matter how small or large) that is capital in nature (ie replacing the roof), the cost of the levy to you must be depreciated, you can not claim the cost of the special levy outright.  Even though the cost is the strata’s the monies you put in must be depreciated, not claimed just as a normal body corporate expense.

But as Scotland explains, bring the items to your accountant to cross check.

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reddant
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01/01/2018 - 9:47 am
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Missy said
Hi, I am a tax accountant and can tell you:

As a general rule, if the intention was a repair and the replacement was of a similar type (ie replacing lino with lino, not replace lino with timber floor boards) then it will normally be an out right deduction for the items you list.

What would not be out rightly deductible would be replacing the roof.  Even if it got damaged and the decision was to replace the entire roof, then the cost was have to be depreciated as a capital cost.  You still get a tax deduction for the cost out layed, but over many years.  

As a side note and strata related.  If there is a special levy raised (no matter how small or large) that is capital in nature (ie replacing the roof), the cost of the levy to you must be depreciated, you can not claim the cost of the special levy outright.  Even though the cost is the strata’s the monies you put in must be depreciated, not claimed just as a normal body corporate expense.

But as Scotland explains, bring the items to your accountant to cross check.  

Missy

Sounds like you might be able to answer my question too.

My Owners Corporation got fined $22k by the court for breaching fire safety. It spent as much on barristers fees.

Are investor owners now entitled to claim this as an expense? If the $22k is buried in the admin or sinking ledger as expenses?

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Missy
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02/01/2018 - 8:41 pm
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The investors would only be able to claim any deduction if they contributed funds to cover the expenses.  If the funds to pay the legal fees came out of the existing fund, (the standard levies contributed) the no additional tax deduction can be claimed. You can claim the quarterly levies as normal, but not the expenses of the Strata if no additional funds were contributed.  No contribution no deduction.

If funds were contributed to cover the expenses generally only the legal fees portion of the contribution are tax deductible. Under the tax act fines are not an allowable deduction, but you may want to check this as this area of the tax act is always changing.

if you have an accountant I would check with them first before claiming anything.

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