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What’s the difference between a repair and an improvement?

Deductions for repairs, maintenance and improvements are matters the Australian Taxation Office pay particular attention to on annual tax returns. For this reason, it is important that landlords understand the difference.

Repairs

Repairs are considered work completed to fix damage or deterioration of a property, for example replacing part of a damaged fence.
 
Maintenance
 
Maintenance is considered work completed to prevent deterioration to a property, for example oiling a deck.
 
Any costs incurred to repair or maintain a rental property can be claimed as an immediate 100 per cent deduction in the year of the expense.

Capital improvements

A capital improvement occurs when the condition or value of an item is enhanced beyond its original state at the time of purchase.

This must then be classified as either a capital works deduction and depreciated over time, or as plant and equipment depreciation.
 
An example of a capital works deductions could be replacing the kitchen cupboards. If any plant and equipment items are removed and replaced, for example an air conditioner, this will also be considered a capital improvement.

Investors considering completing any work to their property should contact a specialist Quantity Surveyor for advice before they start work.
 
To discover what can be claimed for any investment property, simply request a quote online or speak with First National Real Estate’s alliance partner team at BMT Tax depreciation on 1300 728 726, or visit www.bmtqs.com.au.
 
End of financial year

With end of financial year approaching, speak to us about obtaining a Tax Depreciation Report for your property.
 
A Tax Depreciation Report costs only several hundred dollars but can increase your annual yield by potentially thousands of dollars. Ask us for more information. 
 

SOURCE: BMT Tax Depreciation