You can claim a deduction for repairs to machinery, tools or premises you use to produce business income, if the expenses are not capital expenses.
To repair something, generally means to fix defects or renew parts. It does not mean totally reconstructing the item. The repairs must relate directly to wear and tear or other damage that resulted from using the item or asset to produce business income.
You don’t have to own the property or item that is repaired if it’s held (for example repairs to assets that are subject to a hire purchase agreement are generally deductible).
Repairs don’t include substantial improvements to an item or property, such as replacing a dilapidated ceiling with an entirely new and better ceiling. This would be considered a capital expense.
Similarly, costs for repairs carried out straight after buying or acquiring machinery, tools or property are considered capital expenses because the price paid for the item reflects its condition.
Example: Amara’s second-hand oven
Amara is a pastry chef who runs a small bakery. Her business is growing so she finds a second‑hand oven on Facebook marketplace and buys it for a bargain price. It has broken seals and a faulty temperature gauge which is one of the reasons why she is able to get it at such a low price.
The day after the oven arrives, Amara organises and pays for the seals and gauge to be repaired.
Amara can’t claim a deduction for the cost of these repairs because the:
In this instance, Amara must treat the repair costs as capital costs, which are added to the oven and depreciated.
