If you replace something that is worn out, damaged or broken as a result of renting out the property, this is likely to be a repair. For example, replacing part of the fence damaged in a storm or getting in a plumber to fix a leaking tap. This should be claimed at Repair and Maintenance on the rental schedule.
If you are preventing or fixing deterioration of an item that occurred while renting out your property, this is likely to be maintenance. For example, getting faded interior walls repainted of having a deck re-oiled. This should be claimed at Repair and Maintenance on the rental schedule.
If you repair damage that existed when the property was bought (whether it was known about at the time of purchase or not), this is likely to be an initial repair. For example, fixing floorboards or repairing a broken window that had damage when the property was bought. This should be claimed in your cost base at Capital Works or Capital Allowances on the rental schedule.
If you replace an entire structure that is only partly damaged, or renovate or add a new structure to the property, this is likely to be a capital works. For example, replacing all the fencing, not just the damaged portion, or adding a carport. This should be claimed at Capital Works on the rental schedule.
If you install a new appliance or floor/window covering, this is likely to be a depreciating asset. For example, buying a brand new dishwasher or installing new carpet. This should be claimed at Capital Allowance on the rental schedule.
Repairs and maintenance
The cost of repairs and maintenance may be deductible in full in the year you incur them if both:
the expense directly relates to wear and tear or other damage that occurred as a result of your renting out the property
the property either
continues to be rented on an ongoing basis
remains available for rent but there is a short period when the property is unoccupied (for example, where unseasonable weather causes cancellations of bookings or advertising is unsuccessful in attracting tenants).
Northcity Accountants open till 8 PM Monday to Saturday 9 AM- 8 PM call 03 9404 2737 for appaointments