Tag: repairs

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Expert Tips RENO ADDICT

Baz Du Bois on the real cost of home maintenance

The cost of maintaining a home should always be considered when buying a property, yet it’s often forgotten about. As a general rule of thumb, expect to spend around 6 to 8% of the value of your home on maintenance over a 10-year period for houses and half that for units (due to levies and body corporate funds). That’s around $30,000-to$40,000 for a home valued at $500,000, so it quickly adds up.

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Comparing house to human years, the first few years of a home’s life are similar to a newborn baby. In the beginning, all they do is eat, sleep and have their nappy changed. Everything runs smoothly – there’s no leaking taps or electrical issues and everyone who lives in the home takes very special care of it to make sure it stays that way.

Two years on and your new home is not so new anymore. Like a toddler, it has a few bumps and bruises – the walls are chipped, the interior need a repaint, floor coverings get tired, tap washers need replacing  and then there’s the ongoing cost of white ant and pest control. Slowly, the home is starting to age and look a little worn.

Five years on, as your child starts their first day of school and gets a few coughs and colds so too does your home. Perhaps you called in a plumber to fix that persistent drip from a leaking tap in the bathroom, the dishwasher may have stopped working and the outside of your home needs a good scrub. The hot water system needs maintenance work, the eaves and gables require painting, a tree root has invaded the sewage pipes and if you haven’t already, the walls are well overdue for a repaint and carpet need to be replaced.

When your child starts high school, the maintenance costs really start to add up. It’s time for a new kitchen ($15,0000) and bathroom reno ($10,000). From when you purchased the home, until now that’s over $1,000 a year you need to save!

As your teenager hits puberty, so too does your home – in a big way! There’s problems with sewerage, the gutter needs replacing and just like your teenagers bedroom the floors are a mess and the termites have moved in. If the budget allows, you also consider extending the living space as your not-so-little baby becomes more independent and when your teenager learns to drive, suddenly you need more parking space. Then, after about 40 years, the roof needs to be looked at.

So, as you can see maintaining a home is a very costly exercise. The early years wont set you back too much but after you’ve been living in the property for a while it really starts to eat away at your budget. If you have a unit, there’s also strata levies to consider. On the positive, your home has probably increased in value and you’re ready for a kitchen revamp!

It’s also worth noting that just like we exercise to look after our bodies, there’s plenty you can do to look after the health and wellbeing of your home. Oiling the front door and replacing the anode in the hot water system will more or less double its life.

It also pays to be prepared because getting caught out with a maintenance issue that becomes an emergency problem will definitely cost extra dollars. And think about how you can cover some maintenance issues when planning an extension or renovation, so you don’t double up.

Little things that quickly add up and need to be considered when buying a home.

Read all Baz’s articles, read more about Baz or ask him a question.

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DIY RENO ADDICT

How can a handyman help you?

Have you got a list of small jobs that need doing, but you haven’t got round to them for whatever reason? Could be you don’t have the time, aren’t that ‘handy’ or don’t have the tools to DIY?

If so, maybe it’s time you got in touch with a local handyman who specialises in minor repairs and maintenance, and save yourself a heap of time and hassle.

A Man at Hand Property Maintenance
Image: A Man At Hand Property Maintenance. Click for details.

So, what jobs can a handyman do?

A lot is the short answer, but trade licensing does make it a little complicated.

Every state and territory has its own set of licensing regulations which govern what a tradie can legally do. So it depends on where you live. For example, in New South Wales fair trading has a minor maintenance/cleaning licence class which covers, “the non-structural maintenance (including minor repairs) or cleaning of existing works/structures/buildings.” But, if the value of the work is under $1,000 then you are not bound to use a licensed tradie.

So best to check what applies to where you live.

What a handyman can do

Assuming most ‘small’ jobs are going to be under a grand, here is a (small) selection of jobs that a handyman could help you out with:

  • Minor repairs and maintenance, anything from putting up a shelf to fixing a door that jams
  • Painting, varnishing and sealing
  • Garden clean ups and rubbish removal
  • Hanging your TV, mirror or picture on a wall
  • Assembling your flat pack furniture (IKEA)
  • Door hanging
  • Window cleaning
  • And most other odd jobs you can think of…

What a handyman can’t do

Don’t forget, while a handyman is very capable, for many jobs you (legally) need to call in a licensed professional. Here we are talking any job that involves:

  • Asbestos removal
  • Building work
  • Electrical work
  • Gasfitting
  • Pest control
  • Plumbing

There are others, but those are the critical ones. Also remember, you still need to make sure your handyman carries insurance and comes recommended.

– Craig is the online editor of hipages.com.au, Australia’s largest network of trade professionals and the perfect place to find a handyman in your local area.

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RENO ADDICT

When is a repair on a rental property an improvement as far as the ATO is concerned?

The Australian Taxation Office (ATO) has issued a number of warnings recently indicating that rental property owners should be careful when claiming deductions.

Common errors highlighted by the ATO include claiming rental deductions for properties not genuinely available for rent, incorrectly claiming deductions for properties only available for rent for part of the year, claiming costs as repairs when they should be depreciated as a capital improvement and claiming capital works incorrectly as plant and equipment.

DSC_4949 Brad Beer Profile

Navigating the rules relating to rental property deductions can be quite complex for owners, particularly when it comes to depreciation. It’s important that owners have a basic understanding of depreciation legislation and the terminology used to categorise the deductions which can be claimed within a property. This includes recognising the difference between repairs, maintenance and capital improvements.

To assist investors to avoid a tax headache and claim deductions correctly this financial year, here are some of the key depreciation terms and tips on how to avoid incorrect claims.

Capital works deductions versus plant and equipment depreciation

Deductions for capital works comprise of the structural elements of a building, including fixed and irremovable assets. Examples include the roof, walls, built in cupboards, clothes lines, windows, doors and even the driveway. Dependent on the property’s age, investors can generally claim capital works deductions at a rate of 2.5% per year.

If a residential property was constructed prior to 15 September 1987, there are restrictions which apply. However, investors who own older properties may still be entitled to capital works deductions for any renovations, including those completed by the previous owner.

Plant and equipment items on the other hand depreciate at a much faster rate. Examples include carpets, hot water systems, air-conditioning units, security systems, blinds and curtains. Determining the deductions for these items is not dependent on their age, rather their condition and quality. To calculate depreciation for plant and equipment, the effective life of each individual asset set by the ATO should be used.

It’s not uncommon for investors to self-assess depreciation deductions for plant and equipment items. However, by doing so they are putting themselves at risk of the following mistakes:

  • They can categorise plant and equipment assets as capital works deductions or vice versa. This mistake can result in plant and equipment assets being claimed at only 2.5% per year, rather than at their higher effective life rate. It can also lead to capital works items being claimed at higher rates than they should be, placing the investor at an increased risk of an ATO review of their claim and potentially resulting in them having to pay cash back.
  • They could incorrectly determine a plant and equipment asset’s effective life based on its condition. For example, they may believe a carpet only has a remaining effective life of two years. However, carpets are deemed as having an effective life of ten years in residential properties. Incorrectly determining an assets effective life could result in missed claims.

Repairs and maintenance versus capital improvements

Investors will face a scenario where work is required to ensure upkeep or repair damage done to their property. The work completed can inadvertently improve an item’s value beyond the original condition of an asset.

The ATO provides clear definitions to help investors to determine the difference between what is considered a repair, regular maintenance and what is defined as a capital improvement. A repair involves any work completed to fix damage or deterioration of a property. Examples include replacing part of a fence broken during a storm. Maintenance is considered work which will prevent damage or deterioration, for example having the carpet cleaned or oiling a deck.

The costs for repairs and maintenance can be claimed as a 100 per cent deduction in the same year of the expense. However, if an investor was to remove and replace the entire fence, carpet or build a new deck, this will fall into the category of capital improvements.

Capital improvements, or work which improves an asset beyond its original condition, must be depreciated and claimed as a capital works deduction or as depreciation.

How to avoid the risks

Investors can avoid many of the risks of claiming deductions incorrectly for their property by seeking the advice of a specialist quantity surveyor. They will complete a site inspection of the property to identify all of the plant and equipment assets found, take measurements and conduct research to find the correct capital works deductions available and outline deductions for plant and equipment assets based on their individual effective life. A tax depreciation schedule will outline these deductions for the property owner’s Accountant to process their claim.

A depreciation schedule provided by a specialist quantity surveyor will help to ensure the correct and maximum deductions are claimed and minimise risk for both an investor and their accountant.

–Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry.

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DIY RENO ADDICT

Claiming tax back on investment properties: the basics

Property investors often worry about ongoing repairs and maintenance costs, however these concerns can often be reduced by claiming back these costs when completing a tax return. Before claiming deductions, it is necessary for investors to understand the difference between claiming repairs, maintenance and capital improvements.

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Repairs

The Australian Taxation Office (ATO) defines repairs as work completed to fix damage or deterioration of a property, for example replacing part of a damaged fence. A deduction cost paid to repair a rental property can be claimed as an immediate 100% deduction in the year the expense is incurred.

Maintenance

Maintenance is defined as work completed to prevent deterioration to a property, for example mowing the lawns. Costs for maintenance of a rental property can also be claimed as an immediate deduction in the year the expense is paid.

Capital improvements

Improving the condition or value of an item beyond its original state at the time of purchase is defined as a capital improvement. These are classified as either capital works deductions or plant and equipment and must be depreciated over time. Capital works deductions include renovations such as adding an internal wall and also include items which cannot easily be removed from the property. Plant and equipment items include removable items such as carpet and hot water systems.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over sixteen years experience in property depreciation and the construction industry.

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Furniture

I Love My Chair: a new lease of life for your tired chairs

After winning a pitch contest, Emma Veiga-Malta was flown to Silicon Valley to talk about expanding her successful online design-it-yourself chair business, My Bespoke Chair, to the US.

Emma Veiga-Malta interiors addict

However, while she thoroughly enjoyed the experience, what she realised was that by expanding her business she’d lose the core element of what she loved to do, and that was create beautiful things. “By expanding my business, all of sudden I would lose touch with my clients, I wouldn’t be creating fabrics myself or doing my chairs myself and that all made me quite sad,” explains Emma. “So I thought, no! I need to use everything I learnt in Silicon Valley and pivot my business so that I’m adding services that I love to give my clients. And I know that my clients need.”

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So began Emma’s new venture, I Love My Chair, which with six different services, offers custom fabric design, fabric sourcing, chair sourcing, chair repairs, ready-to-buy chairs (designed by Emma herself), and design-it-yourself chairs under the umbrella of My Bespoke Chair. “While working on My Bespoke Chair, I realised a lot of people actually already owned chairs they wanted to have redesigned rather than buying new. Customers were coming to me asking if I could help with their redesign; so I thought hang on, there’s a real business here! Now My Bespoke Chair has become one of the services I offer, instead of being the only service.”

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Based in Sydney, I Love My Chair is very much a collaborative process between designer and customer, with Emma seeing herself as a style advisor. “People come to me and we work together to get their chair looking beautiful again. I’m really a style advisor for their chairs. So instead of being an online business, it’s a collaborative business. People have that one-on-one with me and that’s what gets me really excited!”

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With a degree in fashion and textiles and having worked as an artist and designer for the last 16 years, Emma is very familiar with the creative industries. Whether it be painting and designing fabrics, or giving a new lease of life to that heirloom chair, Emma’s main drive is transforming something you hid in the garage into a piece that is worthy of centre stage. “The creative process is what gets me really excited. I just love what I do and I think you can really tell that through my work.”

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