Repairs or Renovation - The rule of wear and tear

The Australian Taxation Office stipulates that a rental owner is entitled to claim the costs of any type of work done to an investment property provided that the expense ultimately contributes towards its overall maintenance and repair.

With the term ‘repair’, the ATO is referring to any corrections that are made to repair damages, defects or instances of wear and tear affecting the property during the time it is rented out to tenants.

"To repair something means to fix defects, including renewing parts. It does not include total reconstruction,” the ATO confirms.

In other words, while the replacement of a broken shower head or the resealing of a leaking bathtub are both considered claimable at tax time, transforming a perfectly functioning bathroom into an art deco meets Moroccan affair most likely wouldn’t receive the tax office’s seal of approval.

At the other end of the spectrum, there are the costs that are put towards maintenance of the rental property, which are also tax-deductible.

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Jason Gwerder
Wednesday, 23 June 2021

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