Question:
Initial Repairs
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Question: I have just bought a house that I intend to rent out to a tenant. Before I do that, there are repairs needed including carpentry repairs to the deck at the back of the house, painting, replacement of the carpet and replacement of the dishwasher. Can I get a deduction for these repairs?
Answer: Unfortunately, no you can’t get an immediate deduction for those items. However, you can claim depreciation for the new carpet and new dishwasher and you can claim the capital works allowance for carpentry repairs to the deck and also the painting.
Explanation: As you have just bought the property, all of those items are considered either “initial repairs” or a “replacement of an entire item”.
Spending money to remedy defects, damage or deterioration that existed at the time you bought the property is considered to be initial repairs and capital expenditure. The repairs section of the 97 Tax Act says that:
a) Although you can deduct expenditure incurred on repairs of a premises or plant; unfortunately
b) You cannot deduct capital expenditure.
If some of the deterioration needing repair occurred after you owned the property, you may be able to apportion some immediate deduction from the repair cost that relates to your ownership period.
With the new dishwasher and probably also for the new carpet, there is the replacement of an entire item which is not a repair. Rather, the cost of the replacements can be deducted over the effective life of the new dishwasher and the new carpet.
TR 97/23, s 25-10, W Thomas & Co Pty Limited v FCT (1965) 115 CLR 58 at 72
Andrew and Tony Lovett
22 February 2016
