Repairs and improvements are commonly confused.
A repair usually fixes damage, wear and tear, or deterioration. It restores an item to its previous condition without substantially improving it.
Examples may include:
- Fixing a leaking tap
- Replacing broken tiles with similar tiles
- Repairing damaged carpet in one area
- Fixing a broken window
- Patching a damaged wall
- Repairing part of a fence
An improvement usually upgrades, replaces, extends, or enhances the property.Examples may include:
- Full kitchen renovation
- Bathroom upgrade
- New deck
- Extension
- Replacing old carpet with higher-quality flooring throughout
- Installing new air conditioning where there was none before
- Major landscaping works
- Structural alterations
This distinction matters because repairs may be claimed differently from capital improvements.A depreciation schedule can help identify capital works and depreciating assets created by improvements. However, whether an expense is a repair or capital improvement is ultimately a tax treatment question for the accountant.
Koste.ai helps investors understand the difference so they can give better information to their accountant and avoid treating major works incorrectly.
Frequently Asked Questions
Is repainting a rental property a repair or improvement?
Repainting to restore the property to its original condition is generally a repair. Repainting as part of a broader upgrade or renovation may be treated differently.
Can I claim a full roof replacement as a repair?
A full roof replacement is generally treated as an improvement rather than a repair. It may be claimable as capital works rather than an immediate deduction.
Does timing matter for claiming repairs?
Yes. Costs incurred before a property becomes income-producing, or as part of an initial renovation after purchase, may not qualify as immediately deductible repairs.
What if my invoice does not separate repairs from improvements?
A builder invoice that combines repairs and capital improvements should be broken down where possible. A quantity surveyor can help separate the costs for tax purposes.
Can I claim the cost of replacing a damaged appliance?
A like-for-like replacement of a damaged appliance may be a repair. An upgrade to a better model is more likely to be treated as a new depreciating asset.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai