I had to evict my tenants about a month ago. They have now left and I have plans to renovate -totally new kitchen and bathroom.
Advice from person no 1: renovate now before new tenants move in but you wont be able to claim any of the reno as a deduction as its all new and something about improvements versus repairs.
Advice from lady No 2 (fellow investor): she renovated her IP last year and claimed the lot.
Option 3: wait until the tenants have moved out
confused.,..
Snowflake
Snowflake
A couple of options: Check with your accountant, the tax office, or source a copy of the book ‘The Insiders guide to profitable property investing’ by Patrick A Bright. Refer Pages 122-123.
Good Luck!
Cheers
David
It shouldn’t matter. If the property is a rental, whether you do it while empty or tenanted, the tax deductions should still be the same.
I think your friends may have been referring to you trying to make out you are doing repairs. Repairs can be claimed straight away, whereas improvements may have to be depreciated over a number of years.
Terryw
Discover Home Loans
Parramatta
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So from what you are saying:
1. I can still claim repairs even when they were done/bought when the property was not tenanted…..
2. From a major kitchen and bathrom reno…what things would constitute a repair versus improvement. For example: we are putting in new bth and vanity to replace old one that is totally unusable… is this a repair or improvement….A new kitchen would be an improvement???I am a young girl with her first IP and I really value your help on the forum….My family dont “talk” this language at all… I often get frustrated [blush2][inlove]
Snowflake
I think as long as your property was an investment, or intended to be an investment, then you can claim things.
With the repairs, if you replace something with something better, then it is an improvement. if you bring it up to the original condition, then a repair. ie with the bath, if you just replaced it with a new bath that is similar, it may be a repair, if you got one of those spa type baths, that would be an improvement. Its a fine line.
You had better check this with your accountant, and also look at the rental properties booklet available from the ATO. http://www.ato.gov.au
Terryw
Discover Home Loans
Parramatta
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Hello Snowflake
I thought I’d rephrase this for you as from your last post I wasn’t sure that you really understood about repairs v improvements.
They are BOTH deductable. You can claim both of them.
The difference is how they get to be deducted.Repairs are deducted in the one year while improvemnts are depreciated … or put another way … are deducted bit by bit over a number of years. That’s not necassarily a disadvantage.
Hope this helps [smiling]
ElkaHello Snowflake
It’s great that you are investing and asking questions when no one at home speaks the same language. That takes courage.
Re your improvements/repairs – may I just ask if you have assessed what increase in rental that you might expect. It might be a way of choosing how much you spend and then knowing it is a repair or an improvement.
All the best with it.
Dale
Snowflake, Terrw has hit it on the head. Whether it is done while the place is occupied or vacant is up to you and your tennants and doesn’t affect the rules relating to deductability v’s depreciation. Those that tell porkies and state that the renewal was actually a repair and try to claim the lot in that financial year may get away with it….then again if they get hit with an audit, they may not. Whether it is inhabited or temporarily vacant has no effect on the ruling relating to deductions or depreciation
Peej
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