Repair and maintenance expenses

What you can claim

Repair and maintenance expenses are costs you incur to:

• keep your property in a tenantable condition
• fix wear and tear or damage that occurs while renting out your property.

To be a deductible expense, the property must either:

• continue to be rented on an ongoing basis
• remain genuinely available for rent, even if there is a short period where the property is unoccupied – for example, unseasonable weather causes cancellations of bookings or all reasonable efforts to attract tenants were unsuccessful.

Some repairs are considered capital in nature and must be claimed over several years. This may include:

• initial repairs for defects that existed at the date you acquired the property
• improvements, which are capital works
• replacement of entire units of property, including depreciating assets.

Watch: Getting repairs and capital works right

Repairs

Repairs are done to remedy defects in, damage to or deterioration of the property. Repairs must relate directly to wear and tear or other damage that occurred while you were renting out the property.

Any repairs for remedying damage that existed when you acquired the property are initial repairs and are capital in nature.

Examples of repairs you can claim immediately include:

• replacing a cracked pane of glass in a window
• replacing part of the gutter
• replacing part of a fence
• repairing electrical appliances or machinery.

If you no longer rent the property, you may still be able to claim repair expenses where both:

• the need for repairs related to a period when the property was income producing
• the property was income producing during the income year you incurred the expenses.

Repairs versus improvements

If you make repairs and improvements to your property simultaneously, you can only claim a deduction for the cost of repairs if you can separate the cost of the repairs from the cost of the improvements.

An improvement is anything that makes part of the property better, more valuable, more desirable or changes the character of the item that is being worked on (for example, a renovation).

If you hire a builder or other professionals to carry out these works, we recommend you ask for an itemised invoice to help work out your claim.

Maintenance

Maintenance means work to prevent deterioration or fix existing deterioration. Maintenance generally involves keeping your property in a tenantable condition.

Examples of maintenance include:

• repainting faded or damaged walls
• oiling, brushing or cleaning something that is otherwise in good working condition – for example, oiling a deck or cleaning a swimming pool
• maintaining plumbing.

You can claim a deduction for maintenance expenses in the income year you incur them.

Initial repairs

Initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property can't be claimed as an immediate deduction. It doesn’t matter if you were unaware of the need to make repairs to the property at the time you purchased it.

Initial repairs to property such as a fence or building can generally be claimed as a capital works deduction over 40 years. Initial repairs to depreciating assets can't be claimed as a deduction, however the decline in value of new replacement assets is generally deductible as capital allowances.

The cost of initial repairs forms part of the capital gains tax (CGT) cost base when you sell the property. You must reduce the CGT cost base by amounts claimed (or that you were entitled to claim) as capital works for the initial repairs.

For more information about how CGT applies to rental properties, see our Guide to capital gains tax.