{"id":5019,"date":"2015-06-30T17:23:16","date_gmt":"2015-06-30T07:23:16","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5019"},"modified":"2015-06-30T17:23:16","modified_gmt":"2015-06-30T07:23:16","slug":"when-is-a-repair-an-improvement","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/when-is-a-repair-an-improvement\/","title":{"rendered":"When is a Repair an Improvement?"},"content":{"rendered":"

The Australian Taxation Office (ATO) has issued a number of warnings recently indicating that rental property owners should be careful when claiming deductions.
\nCommon errors made by rental property owners highlighted by the ATO include claiming rental deductions for properties not genuinely available for rent, incorrectly claiming deductions for properties only available for rent for part of the year, claiming costs as repairs when they should be depreciated as a capital improvement and claiming capital works incorrectly as plant and equipment.
\nNavigating the rules relating to rental property deductions can be quite complex for owners, particularly when it comes to depreciation. It\u2019s important that owners have a basic understanding of depreciation legislation and the terminology used to categorise the deductions which can be claimed within a property. This includes recognising the difference between repairs, maintenance and capital improvements.
\nTo assist investors to avoid a tax headache and claim deductions correctly this financial year, here are some of the key depreciation terms and tips on how to avoid incorrect claims.
\nCapital works deductions versus plant and equipment depreciation<\/b>
\nDeductions for capital works<\/b> comprise of the structural elements of a building, including fixed and irremovable assets. Examples include the roof, walls, built in cupboards, clothes lines, windows, doors and even the driveway. Dependent on the property\u2019s age, investors can generally claim capital works deductions at a rate of 2.5% per year.
\nIf a residential property was constructed prior to the 15th<\/sup> of September 1987, there are restrictions which apply. However, investors who own older properties may still be entitled to capital works deductions for any renovations, including those completed by the previous owner.
\nPlant and equipment items<\/b> on the other hand depreciate at a much faster rate. Examples include carpets, hot water systems, air-conditioning units, security systems, blinds and curtains. Determining the deductions for these items is not dependent on their age, rather their condition and quality. To calculate depreciation for plant and equipment, the effective life of each individual asset set by the ATO should be used.
\nIt\u2019s not uncommon for investors to self-assess depreciation deductions for plant and equipment items. However, by doing so they are putting themselves at risk of the following mistakes:<\/p>\n