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Capital Works - better done to an investment?

Discussion in 'Real Estate' started by baz, 17th Aug, 2009.

  1. baz

    baz New Member

    17th Aug, 2009
    Sydney, NSW

    I would like to make improvements and some repairs to an apartment that I'm currently living in. With my limited knowledge of tax laws, I know that as an investment property:

    A. the repairs will be deductible and can be claimed in the year that they are incurred;
    B. the capital cost of the improvements can be added to the cost base in a CGT event (e.g. selling the investment property); and
    C. depreciation on capital improvements may also be deductible.

    Given that I currently live there, should I move out and have the work done on the apartment as an investment property? That is...

    1. move out
    2. engage a property manager to look for a tenant
    3. do all the repairs
    4. make all the improvements
    5. sign on a tenant
    6. in 12 months time, end the tenancy agreement
    7. move back in to enjoy the improvements

    Also, if I was then to sell it as an investment property (e.g. have it leased out again), then can I still add the cost of the improvements to the cost base even though I was the owner occupier in between?

    Any thoughts on this would be really appreciated.

  2. Rob G.

    Rob G. Well-Known Member

    6th Jun, 2007
    Melbourne, VIC
    Initial repairs are capitalised and treated the same as improvements.