Have you ever wanted to get a new chair for your office? Or perhaps you have been annoyed by that stain on the carpet.

It’s infuriating and you want to replace it with just whole new tiles. 

From this article, we’ll show you the tax treatment on upkeep and renovation costs.

Let's start with the fundamentals: you must differentiate the distinction between revenue and capital expenditure. 

Capital expenditure is non-tax-deductible, whereas revenue expenditure is.

Repair can be classed as revenue expenditure and can be allowed as a deduction if that expenditure is wholly and exclusively incurred in the production of gross income under subsection 33(1) of the ITA. Abovementioned repair means restoring an item to its original condition or replacements and does not include changing, altering, or enhancing the condition of the product. 

For example, let’s use the carpet analogy. 

After almost a decade of serving the company, you've decided it's time for an office makeover. The carpet on the floors is the one renovation you prioritise.

With all the amazing things you've heard about tiles, you feel like it’s time for an upgrade after all these years. Low maintenance, long-lasting, and gives off that clean office vibe you've always desired.

Sadly, due to the changing nature of the remodelling, an upgrade is not tax-deductible. Remember that any repairs that allow enterprises to continue operating are considered revenue expenditures.

Revenue expenditure also encompasses the subject of replacements by definition. To be specific, the replacement and renewals of implements, utensils, or articles with an expected life span of less than 2 years. 

To further elaborate on this concept, picture yourself as a business owner running a restaurant. Let’s say you wish to change the utensils in your restaurant after 2 years. Utensils in business are considered a revenue expenditure under the replacement basis concept.