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JamesOnFire(Initiate)Initiate
4 Dec 2021

I bought a property earlier this year. The tenant has raised a number of issues with the sole bathroom that exists there, including leaks, poor drainage, poor connections and improperly installed shower screens. I was hoping to rectify these individually and claim repairs for the next financial year. However, after having the bathroom assessed by 4 independent plumbing/ bathroom companies, they have ALL mentioned that the defects are irrepairable individually, and that the entire bathroom needs to be replaced. They showed photos of structural damage, and a dangerous shower screen that may cause serious injury if not fixed within the next year. This is going to cost me $30,000 and can take 2 weeks to complete, and in the mean time the tenant won't have any other bathroom, so I'll need at least a second small bathroom (which I'm thinking of doing as an outdoor one to save expenses). So the questions are: 1. Because replacement of the entire bathroom were deemed necessary due to structural and personal safety issues, as individual repairs are not possible, can I deduct the entire cost of the bathroom replacement as a repair in one financial year? If not, how can I split the components to include repairs + depreciables separately? 2. Can I include the cost of the smaller (and cheaper) temporary second bathroom (external) as part of the repairs?

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Liked by alfnewman
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alfnewman(Dynamo)Dynamo
5 Dec 2021

Looks like Initial repairs. Not tax deductible. Capital works.

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BlakeATO(Community Support)Community Support
ATO Certified Response5 Dec 2021

Hi @JamesOnATO


@alfnewman is right. Because it is a repair (or entire replacement) to damage that was there before the property was bought, it is an initial repair. This is the case whether or not the damage was known about prior to purchase.


This is claimed at capital works or capital allowances, depending on the work done, on the rental schedule.


Capital works include building and construction costs and major renovations. Capital allowances are for things like exhaust fans, towel rails, shower curtains, and soap holders. This means you'll have both works and allowances to claim. It's important to have a depreciation schedule done to know what you can claim where.


This applies to both the second outdoor bathroom and to the replacement of the original bathroom.


You can read about both of these on our page for rental expenses you claim over several years.

JamesOnFire(Initiate)Initiate
6 Dec 2021

Hmm, but if the tenant only raised it now, several months after the property purchase, how can I be sure that renting it out did not contribute to damage or wear and tear? So would that not come under "Repair and Maintenance"?

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Can I claim a bathroom replacement in an investment property as a repair in one financial year? | ATO Community