As a landlord the dream is to have good tenants that will look after your place as if it was their own, however often this dream is often too good to be true. Unfortunately tenants rarely treat your rental property as their own home so this begs the question what is considered to be repairs and maintenance before it becomes improvements to your rental property?
Repairs are expenditures which may be tax deductable, however the nature of the repairs must be as a direct result of damage done by renting the property. However, it does not constitute repairs if you bought the property in that condition, any changes made on a bought property (that has not been tenanted) constitutes improvements.
- What does ‘repairs’ mean?
Repairs are defined as replacement or renewal of a worn out or broken part i.e. so that the property remains in a tenantable condition, this could include replacing worn or damaged carpet, blinds or curtains.
Generally, your repairs are deductable is the property is:
- Rented on an ongoing basis
- The property is available for rental but there is a short period of time where it is unoccupied
- The property is no longer available for rental, however, the repairs were required from when the property was rented and producing your income.
- The property produced your income in the income year that the repairs were carried out.
- What are some examples of repairs?
If the damage has been done as a result of the property being rented while the tenant was living there then generally it will be considered a repair.
Repairs that you can claim tax deductions from are:
- Repairing broken windows
- Maintaining the plumbing
- Repairing electrical appliances
- Maintenance to ensure the property remains tenantable
- What does ‘improvements’ mean?
If you want to renovate, extend or replace an entire structure to make the property more suitable to be rented out or to achieve a higher income off your property this is generally not deductable.
Some examples of improvements are:
- Adding another room
- Providing insulation to the property
For more information, see the ATO’s rental properties guide, 2016
If you require assistance knowing your rights as a landlord and what tax reliefs you are eligible for contact us on (07) 3862 8777