We recommend seeking advice from a registered accountant or tax advisor about the tax implications before committing to a project.
Claiming Asphalt driveways and repairs on your Tax Return.
If you’re considering installing an asphalt surface including driveways and carparks, or if you are needing to carry out repairs or resurfacing, you may be surprised to know that there are potential tax deductions available. Depending on the intended use, you may be able to claim asphalt maintenance, installation or repairs on your tax return.
Residential property – what classifies as a tax deduction?
Residential properties can claim an asphalt driveway cost if there is sufficient evidence that it was used regularly for income producing activities. There are a few options on how much you can potentially claim on your return and why.
For example, residential properties that operate a business from the rear of the property and need a separate access point from the main personal driveway can include driveway costs, including repairs and replacements as a deduction as long as the driveway is exclusively used for business operations.
If the asphalt driveway is used for personal and business, use the amount you can claim as a tax deduction will be reduced. For example, if you provide a service from your house and you need a new asphalt driveway to operate, this would only be partially deductible as the driveway serves 2 purposes: one for personal use and the other for business use.
Residential rental properties
If you own a residential rental property, you may be eligible to claim an asphalt driveway cost on your tax return.
If damage to an existing driveway was proven to be caused by the tenant/s, the new asphalt surface may be classified as a ‘repair’ and therefore a tax deduction.
If a new asphalt driveway is installed and makes the property more valuable, it would be considered an ‘improvement’ come tax time. Improvements are either Capital Works or Capital Allowances and may not be included as a tax deduction.
An example of an asphalt improvement would be replacing a dirt or gravel driveway with a new asphalt surfaced driveway.
Commercial asphalting - tax deduction classifications.
A commercial asphalt driveway cost needs to be classified as a "repair", "maintenance", or "improvement".
If you purchased a commercial property with a damaged asphalt surface and are looking to replace it, you may not be able to make a claim on the project. Since the price you paid for the property reflected the condition of the property upon purchase, any asphalt driveway cost is likely to be considered an improvement, rather than a repair.
However, if the driveway or carpark has been deteriorating over a period of time in which you have owned the property, those damages may be classified as a repair.