Replacing fence and door tax deductible?

[cgj1]

Hi

1. I have an old plaster fence at my IP that is broken away and collapsing. If I remove and replace the fence with a brick or wooden fence, is this tax deductible as an expense, or capitalised and depreciated?

2. I have a outside wooden door that is starting to rot and wont shut properly. If this is replaced, is this an expense or depreciable?

I've owned the house for 4 years and these issues have got a worse.

Thanks

CGJ1

[Anthonyacat]

Hi

1. I have an old plaster fence at my IP that is broken away and collapsing. If I remove and replace the fence with a brick or wooden fence, is this tax deductible as an expense, or capitalised and depreciated?

2. I have a outside wooden door that is starting to rot and wont shut properly. If this is replaced, is this an expense or depreciable?

I've owned the house for 4 years and these issues have got a worse.

Thanks

CGJ1

As always, it depends on the extent of work and you should get specific advice from your accountant, but the most likely answer is:

1) Removing and replacing the fence with something better is the creation of a new asset. Capitalise and depreciate. The costs of demolition and removal of the old fence would be deductible as an expense, and if you had the old fence on your asset register you could write this off and claim the loss.

2) In almost all cases replacing a door will be maintenance expense. The asset in this case is the house, and you're barely changing the house at all. If you removed the door, widened it to triple-size and double-height then installed an enormous jewel-encrusted talking door imported from the middle east at a cost of $30k, it may change the character of the house and need be capitalised - in this case there would be no depreciation available as a house depreciates at 0%.

[spaceman]

As always, it depends on the extent of work and you should get specific advice from your accountant, but the most likely answer is:

Agreed, but don't let your accountant just fob you off with a yes or a no, get specific reasons.

1) Removing and replacing the fence with something better is the creation of a new asset. Capitalise and depreciate. The costs of demolition and removal of the old fence would be deductible as an expense, and if you had the old fence on your asset register you could write this off and claim the loss.

But what makes a "better" fence???....removing and replacing with a equivalent fence doesn't create a new asset and is deductible....it's a tricky one to say what makes the replacement fence an "improvement" over the existing one …...pigs is pigs after all. I would argue if the replacement fence was of approximately the same dimensions with regards to length and height, then it is a replacement/repair rather than an improvement and thus deductible...….of course if it becomes as awesome as the jewel-encrusted door it's pretty easy to land on the side of an improvement.

2) In almost all cases replacing a door will be maintenance expense. The asset in this case is the house, and you're barely changing the house at all. If you removed the door, widened it to triple-size and double-height then installed an enormous jewel-encrusted talking door imported from the middle east at a cost of $30k, it may change the character of the house and need be capitalised - in this case there would be no depreciation available as a house depreciates at 0%.

fwiw I concur 100%...…...mnmmmmmmm jewels......sparkly

Cheers
Spaceman

[artemis]

About the fence. Presumably you are not looking at a jewel encrusted talking fence to match the door. Not sure what a plaster fence is exactly but if it is being replaced with a sensible fence, not too many embedded diamonds, then I see no reason why it could not be expensed as maintenance. Including costs of removal and disposal of the old fence. So a reasonable wooden fence sounds Ok, brick well depends on what. Like some fences have brick base with palings or trellis on top, not too much more cost than a wooden fence rather than being a super high end one.

I would document the failing fence, with dated photos kept safely in the cloud, along with quotes for wooden or other fences, photos of the finished fence and other documentation. It would help to have invoices setting out the poor condition of the old fence.

I don't know exactly what would trigger IRD to ask, but probably a negative net rents claim, or a significant change from previous years, would suggest they take a closer look. I have had IRD queries a couple of times in those circs. Last one, last year, was the former. Anyway I sent additional info for each property, most of which was all good, but there was one rental that was a definite outlier so I provided more info and tax return was signed off a couple of days later.

It can help to split a bigger expense over two tax years if that timing works for the job.

Anyway, it is more efficient to keep information to support a claim that try to put it together later if it is needed down the track, and IRD is more likely to be convinced by a business like approach.