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Rental expenses, capital or running expenses?

Posted 10 July 2017 under Tax Q&A


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Imtiaz says:
10 July 2017 at 10:45

Please assist on the below as I cannot find additional
information within the current questions on your blog:

While not a monthly expense - it is mentioned that any expenses incurred in
earning the rental property income can be set against the rental income for
tax purposes. Does the following apply to that reasoning:

1. Installation of Prepaid electricity meter (about R1400)
2. Separating the electricity flows for sectioning off the electricity
for the rental portion of the property to the main house (we only renting
off half of the property) - this would allow for connection to the
electricity box so the tenant section can have their own electricity
management and meter etc.
3. Installation of a sub DB box for the tenant section so that this may
allow for separation from non rental property area (approxmately R7000 for
points 2 and 3).
4. Disconnection of the old geyser supply, and re-connection of a new
geyser so that the tenant may have their own geyser for use and management
by themselves (switching geyser on and off) - and this would be linked to
the tenant prepaid meter. Keep in mind the rental property originally had a
geyser supply and this was for separation thereof (around R5000 for geyser
and labour is about R2400).
5. Installation of a small separation vibracrete wall for separation of
the tenant portion of the property and non-rental portion of the property
(R2500).
6. a purchase of a new small stove (about R2800)

The above 5 items were done for the tenants property to be separated
primarily and for separate management of the rental portion of the
property. My view is that the above are expenses.

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TaxTim TaxTim says:
10 July 2017 at 15:45

All of these items are capital in nature and not expenses as they do not actually affect the monthly rental received - i.e. running costs. However they make the property more valuable in terms of what you can charge and therefore increase the income earning opportunity. i.e. they are improvements not repairs and as such add to the base cost of the property if in the event you sell it and therefore reduces the capital gain.


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TaxTim helping
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TaxTim will help you:

 Do Your Tax Return Easily
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 Maximise your refund

Tim uses your answers to complete your income tax return instantly and professionally, with everything filled in in the right place.

Let Tim submit your tax return direct to SARS in just a few clicks!

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