Repairs vs improvements
The distinction that decides whether work on a rental is deducted immediately or claimed slowly over decades.
A repair restores something to its original condition — fixing a leaking tap, replacing broken tiles, repainting a worn wall. Repairs are deductible in full in the year you incur them.
An improvement makes the property better than it was, or replaces an entire item rather than fixing part of it. A new kitchen, an extension, or replacing the whole roof is capital, deducted gradually as capital works or added to your cost base.
The distinction turns on scale and effect rather than cost. Patching a section of fence is a repair; replacing the entire fence with a superior one is an improvement, even if the dollar amounts are similar.
Same room, very different treatment
Repairing a broken cupboard door is deductible immediately. Ripping out the kitchen and installing a new one is capital, claimed at 2.5% a year over forty years.
The bit people get wrong
Work done to fix defects that existed when you bought the property counts as an initial repair, which is capital rather than deductible — even if it would clearly be a repair had the damage occurred later.
Common questions
Can I claim repairs before renting the property out?
Generally no. Work done to bring a newly acquired property up to a rentable standard is an initial repair and treated as capital, not an immediate deduction.
What if I replace something with a better version?
Using modern equivalent materials is usually still a repair. Genuine upgrades that improve function or value tip the work into being an improvement.
Does an improvement give me nothing?
It is not lost, just slower. Capital works are deducted at 2.5% a year, and anything remaining is added to your cost base to reduce your eventual capital gain.