Edited version of private advice

Authorisation Number: 1052510792155

Date of advice: 23 February 2026

Ruling

Subject: Deductions

Question 1

Is the taxpayer entitled to an outright deduction under section 25-10 of the Income Tax Assessment Act 1997 in the 20XX income year for their share of special levies raised by the owners corporation of Strata Plan XYZ to fund balcony remedial works at Property Y, as described in the remedial scope of works and contract documentation?

Answer 1

Yes. You are entitled to a deduction under section 25-10 of the Income Tax Assessment Act 1997 for the special levies paid in the year ended 30 June 20XX. The work carried out was a repair to the building which did not change its character and restored it to its original functionality. Further, the works were not initial repairs carried out to remedy defects or damage that existed at the time the Taxpayer first acquired the property.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XZ

Relevant facts and circumstances

Taxpayer and property

•                The applicant (the Taxpayer) is an Australian resident individual.

•                The Taxpayer is the registered proprietor of Property Y, being a residential unit in an apartment building.

•                Property Y has been held and used solely as a residential rental property. It has been rented or genuinely available for rent since 20XY, including throughout the 20XX income year.

•                The Taxpayer derives assessable rental income under section 6-5 of the ITAA 1997 from letting out the property at arm's-length market rent.

Owners corporation and special levies

•                The building is managed by the owners corporation of Strata Plan XYZ

•                Following engineering investigations and reports, the owners corporation resolved to undertake substantial balcony remedial works to address safety, water ingress and deterioration issues affecting the balconies and associated building elements.

•                To fund those works, the owners corporation resolved to raise special levies, apportioned across all lots by unit entitlement.

•                For Property Y, the owners corporation issued the following levy notices of amount $XYZ.

•                The Taxpayer incurred and paid the special levies in the 20XX income year

Nature and scope of the balcony remedial works

•                The owners corporation engaged consulting engineers to prepare the scope of works.

•                The works are rectifying deterioration, water ingress and non-compliant elements of the existing balconies.

•                The footprint and configuration of the balconies remain unchanged.

•                Replacement materials (for example, aluminium and glass balustrades, compliant membranes and doors) are modern equivalents required to meet current building codes and standards.

•                The owners corporation is not upgrading the property beyond what is reasonably necessary to restore it to a sound and safe condition.

Timing and relationship to income-producing use

•                The balconies were already in place and being used by tenants at the time the Taxpayer acquired the property

•                The deterioration leading to the remedial works developed over a period of years due to ordinary wear and tear, exposure to weather and water ingress.

•                The works are not "initial repairs" carried out to remedy defects or damage that existed at the time the Taxpayer first acquired the property rather, they are subsequent repairs and rectification works arising after years of income-producing use.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10