Initial repairs
Fixing problems that came with a rental when you bought it.
Initial repairs are repairs that fix damage, defects or wear that already existed when you acquired a rental property. They are capital rather than an immediate deduction — even if you did not know about the problem when you bought — and are instead written off as capital works or depreciation where they qualify, or added to the property’s cost base.
A repair is deductible in the year you pay for it when the need for it arose after the property was rented out or made genuinely available for rent. What decides the treatment is when the damage happened, not when the invoice arrived, which is why a date and a short note on each repair are worth more than the receipt alone.
Worked example
You buy a rental with a leaking roof and fix it for $3,000 before the first tenant moves in: that is an initial repair, and capital. Two years into a tenancy a storm damages the same roof and the fix costs $3,000 again: that is a repair, deductible in the year you pay it.
Common mistake
Claiming the pre-tenancy clean-up of a newly bought property as ordinary repairs. Work that fixes what was wrong on the day you bought it is capital, however small each job is.
Grounded in ATO — How to claim rental expenses guidance. Figures last checked . General information, not tax advice.
Related terms
Depreciation (decline in value)
Claiming the cost of a big asset gradually over its life.
Apportionment
Dividing a shared cost so only the income-earning share is claimed.
Rental schedule (rental property schedule)
Where each rental’s income and expenses are reported.
Instant asset write-off
Immediately deduct an eligible asset instead of depreciating it.
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Questions about this term
Initial repairs: common questions
- Are repairs made before the first tenant moves in deductible?
- It depends on when the damage happened. Fixing damage or wear that existed when you bought the property is an initial repair and is capital. A repair whose need arose after the property was rented out, or made genuinely available for rent, is deductible in the year you pay for it — even while it sits vacant between tenants.
- How is an initial repair different from an improvement?
- An improvement makes the property better than it was — a new deck, a renovated kitchen — and an initial repair restores something that was already broken when you bought it. Both are capital rather than an immediate deduction, which is why they are easy to confuse, but the records you keep for them are the same: date, cost and what was done.
- What happens to the cost of an initial repair for tax?
- It is not claimed as a repair. Depending on what was done, it may be written off over time as capital works on the building, depreciated as an asset such as a new hot water system, or added to the property’s cost base and taken into account when you sell. Your accountant decides which; your job is to keep the record.
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