Question: I have just bought a house that I intend to rent out to a tenant. Before I do that, there are repairs needed including carpentry repairs to the deck at the back of the house, painting, replacement of the carpet and replacement of the dishwasher. Can I get a deduction for these repairs?
Answer: Unfortunately, no you can’t get an immediate deduction for those items. However, you can claim depreciation for the new carpet and new dishwasher and you can claim the capital works allowance for carpentry repairs to the deck and also the painting.
Explanation: As you have just bought the property, all of those items are considered either “initial repairs” or a “replacement of an entire item”.
Spending money to remedy defects, damage or deterioration that existed at the time you bought the property is considered to be initial repairs and capital expenditure. The repairs section of the 97 Tax Act says that:
a) Although you can deduct expenditure incurred on repairs of a premises or plant; unfortunately
b) You cannot deduct capital expenditure.
If some of the deterioration needing repair occurred after you owned the property, you may be able to apportion some immediate deduction from the repair cost that relates to your ownership period.
With the new dishwasher and probably also for the new carpet, there is the replacement of an entire item which is not a repair. Rather, the cost of the replacements can be deducted over the effective life of the new dishwasher and the new carpet.
TR 97/23, s 25-10, W Thomas & Co Pty Limited v FCT (1965) 115 CLR 58 at 72
Andrew and Tony Lovett
22 February 2016
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