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Melissa W.
Melissa W.
Elwood, VIC

If we do some minor renovations on an investment property - about $40,000, how much of it tax deductible?

9 months ago


Hi Melissa,
It depends on the work. If you ‘need’ to replace something that is damaged it can be an expense in the current tax year. If you choose to do capital improvements then they would be added to the capital base of the property and may possibly be depreciable or may need to simply be accounted for if/when you sell.
I would speak to your accountant and discuss in detail what you plan to do, how much it will cost ect prior to getting anything started
I would expect that the money borrowed to pay for the renovations would be deductible
Again, check with your accountant and make sure you get all of your questions answered first

Best of luck

if you ask the ATO, probably none.
but the correct answer is that it depends:)

the thing that you need to bear in mind is that if the expense is a REPAIR it is deductible, and if it is an IMPROVEMENT it is not.

so what is a repair???? A repair is something that returns an asset to the state it was when you acquired it. If you IMPROVE the asset, then this is a CAPITAL IMPROVEMENT, and not deductible.

the ATO has been banging on for a few years about something they have dubbed "initial repairs" on investment properties. This means you cant buy a doer-upperer on the cheap, then spend a mountain of cash to do it up, and call it "repairs" because the property is better than it was when YOU first acquired it.

You need to break it down to what things are being done and itemise the cost of each thing, and look at each item on its own merits.

the good news is that you should be able to claim either depreciation or a capital works deduction for anything that is not a "repair"

Hi Melissa,

As both Scott and Brendan have said, it really depends on what you do. If you are installing new applicances and doing major renovations, the capital cost of these can be depreciated over a period of time. If you are doing minor repairs, most likely the whole cost of these items can fully claimed as a tax deduction in the financial year that you complete the work.

But it's best to speak to your Accountant BEFORE you commence the work and show him what you intend to do. He will then advise you what items are claimable in the current year and what items have to be depreciated over a period of time and the net effect this will have on your income for that year.

I'm assuming that you have a mortgage on the property. If you wanted to have a free "Health Check" on your mortgage to ensure that you are not paying too much in interest, please feel free to give me a call and we'll organise a time to get together to discuss your situation.


Michael Budge
Bayside Finance Group
M 0418 547337
E michael@baysidefinance.com.au

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