Claiming cost of repairs from an LAQC

Question from Bruce Shand updated on 3rd November 2006:

We have an LAQC rental property with weather tightness problems.To date we have been required to pay $40,000.00 for repairs from our own savings.Can we claim this as a loan to the company?

Our expert responded:

Any money loaned to the LAQC (or company or trust) is definitely considered a loan from yourselves to the LAQC. The question though is in the tax deductibility of the costs you have incurred. If you have owned the property for a relatively short time, say a year, then the repairs are probably going to be considered capital in nature, which means that they will not be tax deductible and will be treated as fixed assets and depreciated at the appropriate rate. If on the other hand you have owned the property for a while, say five years, then there is a strong argument that these costs are repairs and therefore tax deductible in the year that they are incurred.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.


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