My house is built in the middle of a hill . Last year I added a self contained granny flat in the yard at back of the house. Prior to the build, storm water runoff from hill above and neighbour's place would be captured in a stormwater channel at back of granny flat together with working drainage pipes between granny flat and house, water would be captured and diverted out to the road. Now during heavy storms water is finding it's way and surfacing at lowest point in basement room of our main residence. Asked for several plumber quotes and found previous drainage channel was buried during Granny flat build and pipes broken .Whole Drainage system collapsed and was no longer working and had to be restored and replaced. Plumbers came ,dug out and put back channel between neighbour and granny flat , replaced broken pipes and water now diverted again to road. Cost 25K. Is latter an immediate tax deduction or to be depreciated?
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3 replies
Hi @mikel8,
If the repair resulted in the replacement of the entire drainage system, this would be a capital expense.
If the repair replaced parts of the system to remedy or prevent defects, damage or deterioration from using the property to earn income, then the expense can be claimed immediately, in the year the expense incurred.
Rental property - repairs or capital expenses? provides some information to help categorise the expense.
The rental repairs factsheet is also useful.
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Hi @mikel8,
If the repair resulted in the replacement of the entire drainage system, this would be a capital expense.
If the repair replaced parts of the system to remedy or prevent defects, damage or deterioration from using the property to earn income, then the expense can be claimed immediately, in the year the expense incurred.
Rental property - repairs or capital expenses? provides some information to help categorise the expense.
The rental repairs factsheet is also useful.
Hi Rachel
The broken Drainage system was only around the granny flat and not the entire property. It was a restoration of the system that existed prior to Granny flat build. Plumbers invoice showed it as a restoration of the collapsed drainage system that was previously working efficiently before the granny flat build 5 years ago. Most of work was labour intensive Plumbers had to dig up manually a lot of rock and rubble over a couple of weeks as machinery could not be brought in and restore the drainage channel between neighbour behind and granny flat so water coming from hill above could be captured and taken out to the road .Flooding mainly happened during very heavy storms as other drainage around the main residence could handle moderate rainfall. My concern is the bill was quite large 26K .Now unsure whether to claim a full expense tax deduction this tax year or treat part /whole as capital .
Hi @mikel8,
Probably the best way to be sure, would be to lodge a private ruling. You can then provide the invoice and documents relating to the completed work (for example - engineering reports).
We can give you some general information here, but a ruling would get you a binding decision so you know exactly what you can and can't claim.
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