When we say ‘repairs’, we mean work to make good or remedy defects in, damage to or deterioration of the property, for example:
- Replacing part of the guttering or windows damaged in a storm
- Replacing part of a fence damaged by a falling tree branch
- Repairing electrical appliances or machinery.
- When we say ‘maintenance’, we mean work to prevent deterioration or fix existing deterioration. For example:
- painting a rental property
- oiling, brushing or cleaning something that is otherwise in good working condition maintaining plumbing.
What can you claim?
You can claim a deduction for the costs you pay to repair and maintain your rental property, in the year you pay them.
What can’t you claim?
You can’t claim the total costs of repairs and maintenance in the year you paid them if they did not relate directly to wear and tear or other damage that occurred due to renting out your property. These are capital expenses you may be able to claim over a number of years as capital works deductions or deductions for decline in value.
What records do you need to keep?
The rental income you receive, and the expenses you pay for which you can claim a deduction – keep these records for five years from 31 October or, if you lodge later, for five years from the date your tax return is lodged all costs you incurred when you purchased the property, while you owned the property and when you sold the property, you may need to keep some of these records for longer than five years, depending on how long you own the property. As capital gains tax may apply if you sell your rental property, we recommend you keep records of every transaction over the period of ownership of the property. This would include contracts of purchase and sale, and conveyance and loan documentation. Keeping these records will help you work out your capital gain or loss correctly and ensure you don’t pay more tax than you need to.
Source: ATO (27 March 2009)