If you run a business or own a rental property, repairs are part of the job. But not all repair costs are treated the same at tax time. Knowing what the ATO lets you deduct—and what needs to be claimed over time—can help you avoid mistakes and boost your return. Here’s a simple breakdown.
ATO Guidelines for Claiming Repairs and Maintenance on Your Tax Return
Generally, if you spend money to fix or maintain something that’s already there and used for income-producing purposes, that cost is tax-deductible in the same financial year. This could be anything from repairing a leaking pipe to repainting your shopfront.
But if you replace an entire structure or make improvements that increase the value of your property or business asset, those expenses usually aren’t immediately deductible. Instead, you may need to claim them over time through depreciation.
Examples of Repairs and Maintenance You Can Deduct
Here are a few situations where you can usually claim the cost right away:
- Replacing broken tiles or a damaged window glass
- Fixing a faulty tap or electrical wiring
- Servicing an air conditioning unit
- Cleaning gutters or painting a worn fence
- Repairing potholes in the driveway of your investment property or business premises
These types of expenses are considered “like-for-like” repairs—they restore the asset to its original condition without improving or upgrading it.
What’s Not Deductible Right Away: Upgrades and Improvements
If your work goes beyond simple repairs and involves making the property or asset better than it was before, it’s likely to be treated as a capital improvement.
Examples include:
- Renovating an entire bathroom
- Installing solar panels or security systems
- Replacing an old shed with a brand-new structure
These upgrades are classified as either capital works (which are deducted at 2.5% per year over 40 years) or depreciating assets (which follow a separate schedule based on their effective life).
Repair or Replacement? Know the Difference
The ATO draws a fine line between partial repairs and complete replacements. Here’s a quick comparison:
- Fixing sections of a fence = deductible
- Replacing the entire fence = capital works
- Repairing a damaged roof patch = deductible
- Installing a new roof = capital works
If you replace just a part of something to return it to working condition, it’s usually deductible. But a full replacement of an entire asset (especially if it improves the property) must be claimed differently.
Who Can Claim These Deductions—Landlords and Business Owners Alike
These rules apply whether you’re:
- A small business owner maintaining your premises or equipment
- A landlord repairing your rental property
- A sole trader fixing up your home office area used for work
As long as the expense relates to an income-producing activity, you may be eligible to claim it. Just be sure it meets the ATO’s criteria.
When Can You Claim These Expenses?
You can generally claim the cost of repairs and maintenance in the year the expense was incurred. But if the cost falls under capital works or depreciation, the deductions are spread over several years.
This distinction matters—especially at tax time—so accurate recordkeeping is a must.
Keep Good Records to Support Your Claims
To ensure your claims hold up if the ATO reviews them, make sure you keep:
- Invoices and receipts
- Photos of the work before and after
- Notes on what was fixed, replaced, or improved
- Any professional quotes or reports
- Clear documentation will help your accountant—and protect you in case of an audit.
Need Help? Get Professional Tax Advice
Getting your deductions right can be tricky, especially when repairs and improvements overlap. If you’re unsure, speak with a qualified accountant who can guide you through the specifics based on your situation.
At Chan & Naylor, we help business owners and property investors make smarter decisions when it comes to tax strategy and compliance. If you’d like help sorting through your property or business deductions, we’re here to assist.
About Chan & Naylor
Established in 1990, Chan & Naylor has been a trusted partner for thousands of businesses and investors across Australia. Based in Sydney, we provide expert accounting services tailored to your needs. Choosing Chan & Naylor means you’re not just selecting a service provider; you’re gaining a partner aligned with your business goals. You’ll have access to a dedicated client manager supported by a team of accountants that specialises in business tax and investments. Contact us today so we can discuss how we can help you.
Disclaimer
This article serves as general information only and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
