Claiming tax for repair work carried out

Question from Mary updated on 18th November 2010:

I have just spent 4 weeks working on one of our empty rental property and over the years I haven't claimed for my time. e.g. if I add $4,600 to my expenses and am able to claim back the tax on one hand, and then declare that I have earned $4,600 and pay the relevant tax on it I have always thought it just ends up the same. My friends tell me otherwise. Any info would be much appreciated. I do my own tax returns.

Our expert Mark Withers responded:

I believe this type of money go round is futile. The deduction for the work is equally income to you so the tax outcome is neutral. ie it is a circular transaction that just creates unnecessary paperwork. You could also really end up with egg on your face if IRD took the view that the work on the property was capital improvements and therefore non deductible but still required you to pay tax on the income. I'd say don't go there. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.


Search the Ask an Expert archive

Browse all questions in the Ask An Expert Archive »

Site by PHP Developer