A Landlord’s Guide to Repairs and Renovations in New Zealand

Sep 26, 20244 min read

Owning rental properties is a smart investment, but it comes with its fair share of responsibilities—especially when it comes to repairs and renovations. Keeping your property in great shape isn’t just about keeping tenants happy (though that’s crucial); it’s also about maintaining the value of your investment and navigating the tax rules. So, if you’re a landlord in New Zealand, here’s what you need to know about repairs and renovations, with a nod to depreciation and Inland Revenue rules.

Understanding Your Responsibilities

First things first—what are you responsible for? As a landlord, you’re required to keep the property in a reasonable state of repair. This means fixing things when they break and ensuring the house is safe and healthy. Remember, tenants also have responsibilities, like keeping the place tidy and reporting any issues promptly.

The Essentials: What Needs Immediate Attention?

Some repairs can’t wait. If there’s a burst pipe, a broken window, or a leaky roof, you’ll need to jump on that ASAP. These are urgent repairs because they affect the safety or livability of the home. If you delay, you could end up with bigger problems—and unhappy tenants.

Planning for Non-Urgent Repairs

Not everything needs to be fixed yesterday. Some issues like a worn-out carpet or peeling paint, can be planned for. It’s a good idea to set aside some of your rental income for these non-urgent repairs. That way, when something does need fixing, you’re not scrambling to find the funds.

Depreciation and Tax Deductions

Here’s where it gets interesting: not all repairs and renovations are created equal in the eyes of Inland Revenue. Some costs can be deducted from your rental income immediately, while others need to be spread over several years through depreciation.

For example, repairs that restore the property to its original condition (like fixing a leaky roof), or energy-efficient upgrades may qualify for immediate deductions in the year they’re incurred. But if you’re doing something more substantial, like adding a new room or upgrading the kitchen, these are likely to be considered capital improvements. Capital improvements aren’t deductible straight away but can be depreciated over time. Understanding the difference is crucial because it affects your tax bill.

Inland Revenue’s Special Rules

New Zealand’s Inland Revenue has specific rules about what counts as repairs versus improvements. It’s worth getting familiar with these so you don’t end up on the wrong side of a tax audit. For instance, if you’re replacing an entire structure (like the roof), Inland Revenue might view this as an improvement rather than a repair. However, if you’re just replacing part of the roof, it could be considered a repair. When in doubt, get advice from a tax professional who understands the ins and outs of property tax.

When to Renovate

Sometimes, a quick fix isn’t enough, and it’s time to consider renovations. Renovations can be a great way to increase the value of your property and make it more attractive to potential tenants. However, you’ll need to weigh the cost against the potential return. New kitchens and bathrooms usually offer the best bang for your buck, but even simple updates like fresh paint or new flooring can make a big difference.

Navigating the Healthy Homes Standards

If you’re a landlord in New Zealand, you’ll be well aware of the Healthy Homes Standards. These regulations set minimum requirements for heating, insulation, ventilation, and moisture control. Ensuring your property meets these standards isn’t just about ticking a box; it’s about ensuring your tenants live in a healthy environment. Plus, it’s the law.

Working with Professionals

DIY can be tempting, but when it comes to major repairs or renovations, it’s usually best to call in the pros. Whether it’s a licensed builder, plumber, or electrician, using qualified tradespeople ensures the job is done right—and it could save you money in the long run by avoiding costly mistakes. Orkney Group has a team of roofers, builders, painters and maintenance staff who can help!

Budgeting for Repairs and Renovations

Last but not least, let’s talk about money. Repairs and renovations can be expensive, so it’s crucial to budget for them. A good rule of thumb is to set aside 1-2% of your property’s value each year for maintenance. This might seem like a lot, but keeping on top of repairs can prevent more expensive problems down the line.

Final Thoughts

Being a landlord isn’t just about collecting rent—it’s about maintaining and improving your property to keep it in good condition and managing your tax obligations effectively. By staying on top of repairs, planning renovations, and understanding depreciation, you’ll keep your tenants happy and protect your investment for the long haul. So, roll up your sleeves (or call in the pros) and get to work!

If you're interested in getting a quote for someone else to do the work for you? Give the Orkney Group team a call on 0800 368 470.

TM