Question:
Renting former home out, repairs costs
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Question: Last year, we moved out of our home to relocate and signed an agency agreement and got the real estate agent to find tenants and set up a rental arrangement for the house. There are some repairs that really should be done to the house including carpentry repairs to the deck at the back of the house, replacement of the dishwasher, replacement of the carpet and painting of the exterior of the house. Can I get a deduction for the money spent on those items?
Answer: For the money spent on carpentry repairs to the back deck and painting, you can get an immediate deduction. For replacement of the dishwasher and carpet, you won’t be able to get an immediate deduction but could claim depreciation on the dishwasher and the carpet.
Explanation: This situation is distinguished from the usual circumstance of initial repairs on purchasing of a property where the repairs are considered to be of a capital nature. In this case, the repairs are on revenue account except for the carpet and dishwasher where there is the replacement of an entire depreciable item.
The Tax Office says in the relevant ruling that:
In appropriate circumstances, expenditure for repairs can qualify as a deduction even though the property has previously been held, etc., by the taxpayer for non-income purposes. This situation is different from an initial repair done to newly purchased or newly leased property, where the repair expenditure is capital expenditure.
In the next paragraph of that ruling, the Tax Office also says that a deduction is allowable… even though some or all of the defects, damage or deterioration arise from, or are attributable to, the taxpayer’s holding [of the property for non-income earning purposes]…
TR 97/23 paras 76-77
Andrew and Tony Lovett
22 February 2016
