Repairs, Maintenance & Improvements<< Back to Blog
“What is the difference between repairs, maintenance and improvements in relation to investment property tax deductions?” So we have taken the time to research this information.
What are repairs and maintenance?
When the ATO refer to ‘repairs’, they mean work to make good or remedy defects in, damage to or deterioration of the property. For example: replacing part of the guttering or windows damaged in a storm replacing part of a fence damaged by a falling tree branch repairing electrical appliances or machinery
When the ATO refers to ‘maintenance’, they mean work to prevent deterioration or fix existing deterioration. For example: painting a rental property oiling, brushing or cleaning something that is otherwise in good working condition
Can you claim repairs & maintenance?
You can claim a deduction for the costs you pay to repair & maintain your rental property, in the year you pay them.
What are you unable to claim?
You cannot claim the total costs of repairs and maintenance in the year you paid them if they did not relate directly to wear and tear or other damage that occurred due to renting out your property. These are capital expenses you may be able to claim over a number of years as capital works deductions or deductions for a decline in value.
What are improvements?
When the ATO refers to ‘improvement’ they mean work that: provides something new generally furthers the income-producing ability or expected life of the property generally changes the character of the item you have improved
goes beyond just restoring the efficient functioning of the property
Can you claim the cost of improvements?
You cannot claim a deduction for the total cost of improvements to your rental property in the year you incur them. Example: Tim replaced a fibro cement sheeting wall inside his property with a brick feature wall because it was damaged by tenants. The new wall is an improvement because Tim did more than just restore the efficient function of the wall. This means Tim cannot claim the cost of the new wall as a repair. However, had Tim replaced the fibro with a current equivalent, such as plasterboard, he could have claimed his costs as a repair. This is because it would have merely restored the efficient function of the wall without changing its character, even though a different material was used.