Improvement or capital improvement

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(Newbie)Newbie

8 Jan 2025

The vanity cabinet in bathroom had water damage and draws difficult to open and close in rental property. My agent advised to have it replaced which I did. Tax Agent said it is a capital improvement and therefore cannot claim it as an expense. To enable me rent out the property I required the cabinet to be replaced as it was beyond being repaired. I view this as an expense. However, if it is deemed as a capital improvement (not structural or built) then can I claim for labour?

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MPrivate

(Superuser)Superuser

8 Jan 2025

Hi Chris73,

if something was replaced, it is likely to be an improvement, capital works or a new depreciating asset. Most of the time an outright deduction for such cost is not available and labour can not be treated separately from the item and is included in the total cost of replacing something. A deduction over a period of time could be available to you as capital allowance or capital works write off. See ATO guidance here. Also, take a look at how initial repairs are treated in case it is relevant to your situation.