When it comes to managing rental properties, understanding the distinctions between repairs, maintenance, and capital expenditure is crucial for making the right tax claims. Our quick reference guide provides clarity on how to treat various expenses and how to claim them on your tax return.
For example, if you’re replacing part of a fence damaged in a storm, that’s likely a repair, which can be claimed in the income year the expense is incurred. Repainting faded walls? That’s maintenance, which is also deductible in the year you pay for it.
However, if you’re dealing with initial repairs—like fixing damage that existed when you bought the property—these are considered capital expenses and are generally not immediately deductible. Instead, you may be able to claim these as capital works, depreciating the cost over 40 years.
And if you’re making significant improvements, such as replacing an entire fence or adding a new structure, those are also capital works and should be claimed accordingly.
To dive deeper into the specifics, including examples and how to categorize these expenses correctly for tax purposes, click the link below to access our detailed guide. Understanding these nuances can save you time and money, ensuring you maximize your allowable deductions while staying compliant with tax laws.