My husband purchased an investment property for rental in November 2011 we sold it in October 2015. We have never lived there nor used for private purposes. He stopped renting it out in January 2014 so we could sell the property as the maintenance was not worth the income, the gardens and yards were particularly run down by the tenant. We have taken forever to get it back to shape for sale as it is 5 acres and my husband works 4-5 weeks away then home one week. Finally he employed a labourer to sort out the gardens and the property sold. Some of the time spent was improvement to sell some was reclaiming what existed and some work was ongoing palm frond collection and mowing, a lot in the tropics.
My question is that given that no actual rental income has been earned during 2014/2015, are any of my expenses incurred in that year (such as repairs to damage from tenant, painting and interest) claimable or does he have to allocate some to the cost base of the property?
The short answer is all have to be added to the cost base unless you could say that the reclaiming expenses were incurred in 2014 then you could go back and amend the 2014 tax return to include them.
IT 180 allows you to claim expenses relating to tenant damage to a property providing they were incurred in a year that at least some rent had been earned even if it is not earning rent at the time of the repairs and not intended to be used to earn rent after the repairs. Incurred means that you have instructed someone to undertake the repairs so there is no avoiding the fact you are liable for the expenses that result. I assume none of this will apply to help you.
Accordingly you are stuck with only being able to increase the cost base under section 110-25(4) by the reclaiming what existed, ongoing palm frond collection and mowing and only then if the property was sold at a profit. They cannot be used to increase a capital loss. The improvement to sell can always be part of the cost base even if it pushes it over to a loss.