First Home to Rental (FHOG) to Rental - When to Make Improvements

Lmullahmullah on 07/08/2021 - 18:07
Last edited 07/08/2021 - 18:09

Recently moved into new home that I'm going to live in for a year (maybe longer) to forefill my FHOG and First builders grants. I plan on leasing it out later for next 5 years. It is a family home and plan on buying small unit that is more suitable to the bachelor lifestyle.

I have several things I need/want done to the property, my question must I delay these upgrades until it is 'genuinely available to rent' or when it tenanted too see tax benefits
Shutters
blinds and curtains
pergola extension
landscaping
Front brick fence, and electric gate
shed
concreting backyard
This is probably 15K plus including a few other

Some people have told me to just do it all now and avoid hassling renters and possibly get cheaper cash prices for installation now. If i fore say install shutters today, can i begin to depreciate them in 1 year from now when the property is rented out? I like to do my own taxes so any advice is appreciated. Also like can depreciate my driveway in a year from now that just cost upwards of 5K

Financial

Comments

  • holdenmg on 07/08/2021 - 18:18
    +1

    I'd let it run or get only those things done that you need right now.

    It is Winter now and Tradies and materials are thin on the ground, plus you
    might get disruptions or delays with Covid Lockdowns.

    Think from a Tenants point of view or as a Landlord, would what you are doing make the property
    more rentable.

    • mullahmullah on 07/08/2021 - 18:55

      thats the plan, but still feel their is room for savings my driveway and concrete around the property is quoted for 10K… neighbour wants a side fence thats 1500… I should probabkly see an accountant as i dont know i can claim this stuff later

      • Mechz on 07/08/2021 - 20:32

        An accountant will pay for themselves very quickly in your situation.

  • TheButLover on 07/08/2021 - 18:42

    Do blinds and curtains and basic landscaping now. Live in it for a year, rent it out and when they want to leave that's when you can look into upgrading everything and making that tax deductible without annoying existing tenants. Oh and the stuff you mentioned is easily 30k+ without looking into it too much

    • mullahmullah on 07/08/2021 - 18:44

      Wil the blinds and landscaping probably 7K worth of concrete involved in my landscaping be deductible though when i get a tenant, even the blinds I'm happy with sheets and duct tape if it saves me some money lol

      • bradl822 on 07/08/2021 - 20:36

        No idea about the tax implications but check the warranty on any engineered and hybrid flooring. Many warranties state that you need to protect from the sun i.e. window coverings.

        They don't specifically state window coverings but most had a section around Sun exposure.

        I have seen so many of these floor types open up and look horrible, some are also just bad workmanship.

        Just don't know if it's wait to put something in.

  • TheButLover on 07/08/2021 - 18:49

    I'm not 100% sure, someone can correct me but I'd say a percentage can be deductible. Have a look at Bunnings, spotlight and IKEA for cheap window coverings. Can cut them down to fit (check YouTube for all your how to needs)

  • timthetoolman on 07/08/2021 - 19:00

    Can't comment on the tax side of things, but consider if you'd like to have it all done to live in for yourself for the next year +.
    Also seems like more than 15k worth. Shutters, pergola, electric fence and even landscaping aren't cheap

  • ryan1jz on 07/08/2021 - 20:29
    +1

    You should check with your accountant, but I'm pretty sure that you can't claim improvements, only repairs, and then it's only a percentage of.

    If you have all of those things installed/built now, you'll be able to claim depreciation on them when you begin to rent the property out.
    Of course you can still do that when the tenants are in there, but you'd be annoying them.

    • coxjon on 07/08/2021 - 20:41

      This is correct! Maintenance and repairs are ok but not improvements. We’re just setting up our rental with a tenant and looked into ways to decrease our taxable income

      • arkie0 on 08/08/2021 - 00:44

        It's actually incorrect, a quick google search will give you the correct answer.

        repairs can be an immediate deduction
        replacement or new plant and equipment can be deducted over the life of the equipment
        major improvements are a capital works deduction over 40 years

        • coxjon on 08/08/2021 - 07:16

          I should have read the question better. Yeah in our case we want to reduce income to not hit childcare subsidy cap and depreciation isn’t suitable for us

  • jug123 on 07/08/2021 - 21:21

    Dont do any landscaping unless super basic before or when tenants are in there. Majority of good to great tenants will maintain the landscaping, the rest will do the bare minimum if youre lucky

  • arkie0 on 08/08/2021 - 00:30
    +1

    Not sure why some have said improvements are not ok, anyway…

    Have a read of this https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/R… in particular table 3.

    If it's considered capital works.- which I think everything on your list is except blinds and maybe shed - depends on the type of shed. Then you can build it now and still claim the remaining 39 years of deductions, you just miss out on the first year. I'd still recommend getting a building depreciation schedule through a proper quantity surveyor, makes tax time much easier plus they really cover stuff you might miss doing it yourself - unless you know exactly how much you built the house for as you did say you were claiming first builders grants.

    If you also choose to do cash jobs for cheaper then a surveyor will estimate the build costs up for you to be able to deduct correctly.

    Anything that is not capital works is considered plant & equipment, you can only use deductions for these after the property becomes available for rent.

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