This week’s question comes from Ron (paraphrased):
What is the tax treatment for remedial insulation on a rental property where existing insulation is going to be topped up (i.e. part repair part improvement)?
Mark Withers from Withers Tsang kindly responds below:
The government has not assisted the push for better insulation of Kiwi homes by failing to clarify the capital/revenue deduction position on insulation
upgrades. In most cases, if there is no insulation whatsoever, this would generally be a capital improvement to the building and non-deductible and
non-depreciable. However, the step to take when in determining any capital improvement question with a building is to “ identify the asset” here, the
asset is the building and the insulation is generally attached to the building so where there is existing insulation and work is done to maintain this,
it would seem reasonable to deduct this as general building maintenance as the insulation is not a distinct identifiable asset on its own account.
Note that this answer is general in nature and not intended as professional advice.