27 January

Claiming tax deductions for damage caused at your investment property

When a tenant moves in over time there will be general wear and tear on the investment property.  Examples of general wear and tear may include, the carpet being worn down, doorknobs loose or broken and scuff marks on floors.  Tenants must not cause malicious damage, or by other occupants or guests.  Unfortunately, damage may occur at your investment property by your tenant whether malicious, punching holes in walls or, accidental, a natural disaster!   

Below we take look at different repair and maintenance scenarios and what tax deductions our clients were entitled to claim. 

My rental is now my principal place of residence what can I claim? 

Your tenant has moved out of your investment property, and you have moved in.  Your property is now your principal place of residence.  You have completed repairs and maintenance on damage that your tenant has caused.  You are entitled to claim an immediate tax deduction in that financial year you completed the repair or maintenance. 

Case Study  

Our client Samantha called us and stated that her tenants had caused damage at her investment property.  The interior bedroom doors were ripped of hinges, three kitchen cupboards were destroyed, and the carpet had to be replaced in one of the bedrooms.  

Due to Samantha making good her property and repairing her property to its original working condition.  Samantha was able to claim an immediate tax deduction of $1428 in repairs and maintenance in the financial year she made the repairs. 

Samantha property is now her principal place of residence, she is not entitled to claim the tax depreciation deduction for future financial years.  

My tenant accidentally damaged my investment property what can I claim? 

If your client has accidentally damaged your investment property, you could be entitled to claim tax deductions for repairs and maintenance and for the tax depreciation deduction.  

Case Study 

Our clients Martin and Natasha tenant accidentally damaged carpet in one of the four bedrooms.  Due to the carpet being old throughout the 4-bedroom house, they decided to replace all the carpet with brand-new carpet and repaint the bedrooms. 

Martin and Natasha were entitled to claim an immediate tax deduction of $1250 for repairs and maintenance of the damage to the carpet in one of the bedrooms.  Plus, they were entitled to claim an additional $752 in Division 40 and Division 43 tax depreciation deductions for the brand-new carpet and repainting.   

We updated their exiting tax depreciation schedule free of charge due to the works being a minor renovation.  Other quantity surveyors may change up to or more than $300 to update a tax deprecation schedule.  

I am completing repairs and maintenance at my rental for the next tenant. 

If your completing repairs and maintenance to the damage that was incurred by the old tenant to make your property good for your new tenant, you may be entitled to claim an immediate tax deduction and for the tax depreciation deduction.  

Case Study 

Our clients Naz and Amit completed repairs and maintenance at their investment property before the new tenant moved in.  There was general wear and tear, multiple holes in walls, the lawn was overgrown, rubbish left behind and the property needed a good clean.  The laundry floor tiles were damaged, the toilet leaking and the sink pulled off from the wall. 

They hired a skip bin, lawn maintenance person, cleaner, plasterer and painter to repaint the walls only that had damage and completed a laundry renovation by retiling the floor, installing a brand-new toilet and sink. 

Naz and Amit were entitled to claim an immediate tax deduction of $2951 for the repairs and maintenance to the walls and for the lawn and cleaning maintenance.  Plus, an additional $625 in Division 40 and Division 43 tax depreciation deductions for the laundry renovation. 

**In all of the above scenarios, if claims have been made against your insurance please check in with your accountant** 

How do I claim for my repairs and maintenance tax deduction? 

To claim for the repairs and maintenance as an immediate tax deduction you need to speak to your accountant.  

What deductions can I claim on investment property? 

Here are some of the deductions that are available to property investors: 

  • Repairs and maintenance; 
  • Tax depreciation; 
  • Cost for tax depreciation schedule; 
  • Loan interest; 
  • Council rates. 

Download our ‘Rental Property Tax Deductions Checklist’ to find out what other tax deductions property investors may be entitled to. We recommend property investors confirm what their claimable expenses are with their accountant or ATO. 

 

FAQ's

How do I claim for my tax depreciation deduction? 

You will need to organise a tax depreciation schedule from a qualified quantity surveyor that specialises in tax deprecation.  Here at Capital Claims Tax Depreciation, we have over 20+ years’ experience in helping our clients claim maximum tax depreciation deductions from either their residential or commercial investment property.  

If you would like to discuss what you can claim from your investment property, we can give you a free estimate plus a free quote.  Call us on 1300 922 220 one of our friendly team will be more than happy to answer any questions you may have.   

What damages are tenants responsible for? 

Tenants will be responsible for damage to items that don’t typically wear out or if an item has been damaged that has reduced the items lifespan.  

Does landlord insurance cover tenant damage? 

Landlord insurance protects against accidental or malicious damage that is caused by the tenant, pets or guests.   

 

click to estimate tax depreciation deductions for rental property

About Mark Wilkins

Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.

View all posts by Mark Wilkins

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