Understanding Repairs vs. Improvements for Rental Properties
It's crucial to distinguish between repairs and improvements when spending on a rental property. Why? Because expenses categorized as 'repairs' are usually tax-deductible, while those deemed 'improvements' are not. Check out Taxation Ruling TR 97/23 for more details.
According to S.25-10, landlords can claim deductions for repair expenses if:
- The property is used for income-earning purposes when the expense is incurred.
- The expense isn't of a capital nature.
If the expense doesn't qualify as a repair under S.25-10 (meaning it's an improvement), it needs further analysis to see if it can be written off under the capital allowance rules in Division 40 or Division 43 of the ITAA 1997.
Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar.
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