I'm hoping someone with a bit of tax knowledge can help me out here. I will obviously use a tax agent for the final returns on this, but am after some guidance if possible.
My wife owns a rental, and has always declared the income as her own. We have moved into it this tax year (in September) and have started to do some maintenance and improvements. We were thinking of selling it, but are now looking at renting it out again at a much higher rate than previously.
The maintenance is significant, including restumping and a replacement kitchen and bathroom, and will probably cost around $60,000 in total. The improvements, which include an extra en-suite bathroom, and two extra rooms that become possible due to the restumping, will also cost around $50,000.
My questions are around how these will be seen for taxation. In the past, any minor maintenance has obviously been written off against the income. But these costs will be significantly more than the income for this year. Can these costs be brought forward as losses for next year? Would they be seen as improvements that would reduce capital gains in the future? How would they be split between these two?
I know it is a complex question, but some initial ideas would really help with our understanding here.
Thanks in advance.