Don't confuse repairs and improvements
It is crucial to make a distinction. Repairs and maintenance are immediately deductible whereas improvements are regarded as capital expenditure and are not immediately deductible.
As the tax office explains, “repairs generally involve a replacement or renewal of a worn out or broken part” – such as replacing broken or worn guttering, fences and windows, and maintaining plumbing.
And improvements include landscaping, insulating, and adding a room.
Eddie Chung, partner and property tax specialist with accountants BDO in Brisbane, says the replacement of an entire structure or unit of property is considered an improvement, not an immediately-deductible repair.
Examples include the complete demolition and reconstruction of a slipway or replacement of a complete fence.
See our free ebook on the top 24 tax strategies for property investors.
