Beware of the Pitfalls When Claiming for Improvements and Upgrades to Your Investment Property

When landlords consider “improvements” or “upgrades” to an investment property they should consider what improvements are considered acceptable deductions in terms of the tax office?

Basically the ATO will acknowledge repairs to the property but will differentiate between a repair and an improvement.

Often owners will incur what are determined as capital costs on a property rather than general repair expenses. Capital costs need to be depreciated over periods of time as opposed to general repair expenses which can be claimed in the year in which they were occurred.

With this in mind, owners must be careful as to what improvements or repairs are undertaken. They should also be mindful that the property should be tenanted in order to legitimise such expenses.

In order for such deductions to be relevant it is important to remember that the tax deductions available from investment property apply only whilst the property is available for rent.

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