Help your clients determine when to claim capital works deductions

So long as the property is income producing an investor can claim deductions for interest, rates, repairs, maintenance and capital improvements.

When it comes to repairs and maintenance and capital improvements, each is defined differently by the Australian Taxation Office (ATO). Here are a couple of questions Property Managers can ask investor clients to help them determine the type of claim that applies.

Has the property or item been improved beyond its original condition at the time of purchase?

If an item provides something new or it changes the character of the original item in any way, it will be considered a capital improvement.

Was the asset partially replaced, or replaced entirely?

Partially replacing an item due to damage or wear and tear is classified as repairs. If an owner merely does work to extend the life of an item or keep it from deteriorating, this work is classified as maintenance. If the owner decides to replace the item entirely to improve the property’s value, it will be considered a capital improvement. For a full article explaining how the ATO defines repairs, maintenance and capital works deductions, click here.