Insights · Property and lending
Rental property repairs, maintenance or improvements: what you can claim
Work on a rental property is one of the most common sources of mistakes in rental schedules. The difference between a repair and an improvement decides whether you claim the cost this year or over decades.
Repairs: deductible now
A repair restores something to its previous condition after wear and tear or damage that happened while the property was rented. You replace or fix part of something, not the whole thing.
Examples:
- replacing some broken roof tiles,
- fixing a leaking tap or blocked drain,
- replacing a few damaged fence palings,
- repairing a broken window,
- patching and repainting a damaged wall.
Maintenance: deductible now
Work that prevents deterioration or keeps the property in good order:
- repainting worn paintwork,
- cleaning gutters,
- servicing air conditioning and hot water systems,
- pest control,
- garden maintenance.
Improvements: claimed over time
Work that makes something better than it was, adds something new, or replaces an entire item. These are capital costs:
- Capital works (the structure and fixed items) are claimed at 2.5% a year: a new kitchen or bathroom, an extension, a deck, replacing the whole fence, replacing the whole roof.
- Plant and equipment (removable and mechanical items) is depreciated over its effective life: a new oven, dishwasher, hot water system, air conditioner or carpet.
Using better materials than the original, such as replacing timber with steel, can also turn a repair into an improvement.
Initial repairs: not deductible
Fixing damage or defects that existed when you bought the property isn’t deductible, even if you do it before or soon after the first tenant moves in. The cost is added to the property’s cost base, or claimed as capital works where it relates to the structure. Your purchase inspection report is often good evidence of what was already there.
Quick reference
| Work | Treatment |
|---|---|
| Fix part of a damaged roof | Repair, deductible now |
| Replace the whole roof | Capital works, 2.5% a year |
| Repaint worn walls | Maintenance, deductible now |
| Replace a broken oven | New asset, depreciated |
| Repair the oven element | Repair, deductible now |
| Replace a few fence palings | Repair, deductible now |
| Replace the whole fence | Capital works, 2.5% a year |
| New kitchen | Capital works, plus appliances depreciated |
| Fix defects found at purchase | Initial repair, added to cost base |
Insurance and tenant payments
If insurance or a tenant pays for repairs, you must either reduce your deduction or declare the payment as income.
Before and after renting
Repairs made after the last tenant leaves, while you’re preparing to sell or move back in, may not be deductible, because the property is no longer producing income.
Keep the paperwork
Invoices describing exactly what was done, photos before and after, and your purchase inspection report. A depreciation schedule updated after any renovation captures the capital works and new assets. See depreciation on new and established properties.
We go through repairs and improvements line by line when we prepare your rental schedule. See personal tax returns.