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Rental property maintenance/reno
What will we get back at tax time?


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#1 lilmissmuffet

Posted 10 December 2012 - 06:57 PM

Hi

We've just spent $6000 on painting and re-flooring our rental property after our tenant vacated the unit. It was looking very worn and while not essential it is important to attract a new tenant and raise the rent.

This may seem like a silly question for people who have had a rental property for seven years but when can we expect to recoup our costs? Next tax return? Or when we sell the property in the form of value being added?

In all this time all we've had to do is replace curtains so I'm not sure what to expect!

Thanks in advance - I'm hoping for good news   smile1.gif

#2 protart roflcoptor

Posted 10 December 2012 - 07:06 PM

Capital expenses such as you have described will form part of the 'cost base' of the property. When you sell, the amount of income from the sale that you have to add to your taxable income in the year of the sale will be worked out by comparing the sale price with the 'cost base'. There is a booklet you can order from the ATO that has a plain english explanation of the capital gains tax provisions, or you can download it online.
Guide to Capital Gains Tax

#3 Cherish

Posted 10 December 2012 - 07:08 PM

I'm not sure but don't you depreciate the 6K?
I don't think you'll get a lump sum back like you might be hoping....!

#4 SeaPrincess

Posted 11 December 2012 - 08:24 AM

QUOTE (Cherish @ 10/12/2012, 05:08 PM) <{POST_SNAPBACK}>
I'm not sure but don't you depreciate the 6K?
I don't think you'll get a lump sum back like you might be hoping....!

This is what I thought too, so you'd be able to write off a percentage against the rental income, which reduces your taxable income.

#5 JRA

Posted 11 December 2012 - 10:58 AM

I think general painting can be classed as maintenance, rather than capital.

Yes

http://www.ato.gov.au/individuals/content....nt/00183233.htm

So it would be a deduction if it is maintenance.

Reflooring I would think is capital and then therefore depreciated..


Either way you don't "recoup" your costs ever, no-one else is going to pay for those items, you do. Ok, the tenants do over time.

You don't get a lump sum back even for the items that are repair and maintenance, you only reduce your income by that amount. So at most you will get in reduced tax is 47% if you are on $180K+. But given you have probably not paid the tax for the income on the property yet, it means you will get no $ back, just less off of a tax bill.

Edited by JRA, 11 December 2012 - 11:00 AM.


#6 whydoibother

Posted 15 December 2012 - 05:39 PM

maintenance is a deduction, so it interest on the loan etc.  It basically reduces your tax bill somewhat which is handy if you are in the upper tax brackets.

CGT is more complicated.  Just make sure you keep all your records of expenses etc well and for the 5 years.  Also think about land tax that will come up too at some stage I believe.




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