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Deductibility of Rental Property Repairs

Deductibility of Rental Property Repairs

Just did some repairs on your rental property and are unsure about the deductibility of the expenses incurred? Read on!

Expenses Which are Deductible Immediately

A landlord is entitled to claim a deduction for rental property repairs that relate to defects, damage or deterioration arising from the use of the property for income-producing purposes. A repair for tax purposes if the replacement or renewal of a worn out or damaged part of something, but not the whole thing.

For example, replacing some roofing sheets is a repair. In contrast, replacing the entire roof with roof tiles is not a repair for tax purposes and deemed to be capital.

Strategies to maximise deductions for repairs include:

  • Separate repairs from improvements
  • Fix a minor portion only
  • Fix damaged areas only
  • Replace less than 50% of a wall, ceiling or floor
  • Repair during occupancy or tenants

Expenses Which are Deductible Over a Period of Time

A deduction is not available for any part of a repair expense that relates to defects, damage or deterioration in existence at the time that the property was acquired. These are known as 'initial repairs' and are considered part of the cost of acquiring the property, and are treated as capital in nature.

Where repair expenditure is incurred after a rental property ceases to be used for income producing purposes (ie. the property becomes the owner's main residence), then the expenditure may still be deductible if:

  • The necessity for the repairs relates to a period during which the property was used for income-producing purposes, and
  • The expenditure is incurred in a year that the property was used for income-producing purposes.

Prefer to speak to someone about possible deductions? Contact Fortiz Accountants to make an appointment to discuss taxes relating to your property investments or suitable structures for future purchases.