By Varun Agarwal, co-founder of PropRetire · Published 8 Nov 2026 · Law as read 8 Nov 2026 · 2 min read

Repairs or improvements on a rental: which is claimed now?

A repair fixes damage or wear that happened while the property was rented, and it is claimed in the year you incur it. Replacing a whole thing, improving it, or fixing damage that was there when you bought is capital, and generally claimed over years instead.

That is section 25-10 of the Income Tax Assessment Act 1997, with the ATO's ruling TR 97/23.

It puts right a defect, damage or wear, and that damage has to come from the time the property was rented. The ATO's examples are a cracked pane of glass, part of the gutter, and fixing or replacing part of a fence.

A repair that is capital in nature can't be claimed this way. That is subsection 3 of section 25-10, and the next three answers are the ATO's cases of it.

Then it isn't a repair. In the ATO's example, Robin has owned his rental for 10 years when its toilet is damaged, and the whole toilet needs replacing. It works on its own, apart from the rest of the home, so the new one is claimed as capital works.

A whole fence is the same. Capital works are generally claimed at 2.5% a year over 40 years, and how capital works deductions work has the rest.

Yes. In the ATO's example, tenants damaged Tim's fibre cement sheeting wall, and he replaced it with a brick feature wall. That did more than restore the wall, so it is an improvement, claimed as capital works and not as a repair.

Had Tim used a current equivalent, such as plasterboard, it would have been a repair. A different material is fine, as long as the wall works as it did and keeps its character.

That is an initial repair, and it is capital even if you didn't know about the damage when you bought. In the ATO's example, Lisa's ceiling repair cost $2,000, new roof tiles $9,000 and the structural work $15,000.

None of it is claimed as a repair, but each can be claimed as capital works. When she sells, the $26,000 goes into her cost base, less the capital works she claimed or could have claimed.

No, only what you paid for. In the ATO's example, Sanjay repaints the walls himself over a weekend after his tenants move out.

He can claim the materials to prepare and paint the walls, but not what he thinks his own labour is worth, as it isn't a cost he paid.

Each invoice, saying what was done and why, with photos before and after. Note when the damage happened beside the date you bought, as that tells a repair from an initial repair.

Landlords living in Richmond claimed $13,400 of other rental costs each on average in 2023-24, repairs among them, in the ATO's figures for landlords in 3121. The rental property tax calculator works the tax a rental adds or saves from its rent and costs.