Repairs to a rental property formerly used as a home
In recent years, there has been an increasing tendency for home owners to use an existing home as a rental property, especially where a new home has been purchased.
In these situations, it is common for taxpayers to undertake repairs and maintenance to their existing home in order to make it more attractive to prospective tenants before the property is available for rent and/or actually rented to tenants.
However, according to the ATO, no deduction will be available for repair expenditure that is incurred before a taxpayer’s home is held or used for income-earning purposes (e.g., before the property is genuinely available for rental).
Undertake repairs when property is available for rent
Where appropriate, a taxpayer should consider ‘holding-off’ undertaking repairs to the former home until the property is either genuinely available for rent (e.g., listed with a real estate agent for rental) or actually rented to tenants.
In these circumstances, a deduction for repairs may be available even though:
- the property was previously used by the taxpayer for private purposes (i.e., as the taxpayer’s home); and
- some or all of the defects, damage, or deterioration are attributable to the period the property was used as the taxpayer’s home.