What is the difference between repairs and improvements (tax)?

ITAA 1997 s25-10 makes repairs to income-producing property fully deductible in the year incurred. Repairs restore the asset to its prior condition, fixing a leaking roof, replacing a broken cooktop with similar, repainting where paint has degraded, fixing a worn carpet patch.

Improvements are capital works under ITAA 1997 Div 43, they enhance the property's function or capacity beyond the original. Replacing a kitchen, adding a deck, converting a room, installing solar panels, replacing single-glazed windows with double-glazed. These deductions spread over 40 years at 2.5%/year.

Common confusion: replacing a worn-out item like-for-like is a repair (deductible same year) even if the replacement happens to be slightly newer/better quality (you can't always source the original). Replacing with materially different/better is an improvement.

Initial repairs (made shortly after purchase to put a property into rental condition) are NOT deductible, they're treated as part of the cost base for CGT purposes. The ATO interprets 'initial' generously when the property was rented at purchase, but tightly when you bought a tired house and renovated before letting.