Maintenance vs Improvements: Tax Implications

The ATO treats spending in two ways: Repairs (maintenance) or Improvements (capital works). This determines if you get a tax deduction immediately or over several decades.

Key Concepts

• Repairs & Maintenance: Fixing damage or wear (e.g., a leaking tap). These are usually 100% deductible in the same financial year.
• Capital Improvements: Work that improves the property (e.g., a new kitchen). These are depreciated over time (usually 2.5% per year).

How it works in PropKeeper

• Maintenance: Tagging an expense as "Repair" helps your tax summary show what can be claimed right away.
• Capital Works: Adding these to your "Property Value" helps PropKeeper calculate your new Cost Base, which reduces Capital Gains Tax (CGT) when you sell.

The "Tradie" Advantage

If you are a tradie doing the work, you cannot claim a deduction for your own labor. However, you can claim every cent spent on materials, tools for the job, and external contractors (like an electrician to sign off work).

Pro Tip

Keep a "Renovation Log" in PropKeeper. Not only does this help with tax, but it provides a history that can increase appeal and value during a bank revaluation.