ATO Interpretative Decision

ATO ID 2002/292 (Withdrawn)

Income Tax

Rental repairs - replacement of an entirety
FOI status: may be released
  • This ATO ID is withdrawn. Guidance on the basis of the decision in this ATO ID can be found in Taxation Ruling TR 97/23 Income Tax: deductions for repairs.
    This document has changed over time. View its history.

Status of this decision: Decision withdrawn 24 March 2017.
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Are the costs incurred for the rebuilding of an external protective wall of a rental property deductible repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?


No. The costs incurred in rebuilding the external protective wall are capital in nature and not deductible under section 25-10 of the ITAA 1997.


A rental property the taxpayer has owned for 20 years includes an external protective wall.

After a periodical inspection found the wall to be collapsing, the entire wall was demolished and a new wall constructed in an adjacent location.

The works on the new wall included the building of two additional internal buttress walls to offer ongoing structural integrity, and the use of larger blocks of better quality dimensional sandstone. The new wall was higher in structure and stronger in design than the original wall.

Reasons for Decision

Section 25-10 of the ITAA 1997 allows a deduction for the cost of repairs to premises used for income producing purposes.

Subsection 25-10 (3) of the ITAA 1997 precludes a deduction for repairs where the expenditure is of a capital nature.

The word 'repair' is not defined within the tax legislation. Accordingly, it takes its ordinary meaning. 'Repair' involves a restoration of a thing to a condition it formerly had without changing its character (W Thomas & Co v. FC of T (1965) 115 CLR 58; [1965] HCA 54).

Taxation Ruling TR 97/23 deals with the issue of deductions for repairs.

TR 97/23 provides that expenditure for repairs is of a capital nature where the extent of the work carried out represents a renewal or reconstruction of the entirety (paragraphs 36-42), or the works provide a greater efficiency of function in the property, therefore representing an 'improvement' rather than a 'repair' (paragraphs 44-58).

An 'entirety' is defined as something 'separately identifiable as a principal item of capital equipment' (Lindsay v. FC of T (1960) 106 CLR 377 at 385; [1961] HCA 93).

The external protective wall was the entirety as it was readily identifiable as a separate item of capital equipment.

An entirely new wall of different height, material structure and strength was constructed in a separate location to the original wall. These changes represented both a renewal or reconstruction of an entirety, and an improvement to a fixed capital asset (Case S13 85 ATC 171 and Phillips v. Whieldon Sanitary Potteries Ltd (1952) 33 TC 213).

Accordingly, the costs incurred in rebuilding the external protective wall are capital in nature and not deductible under section 25-10 of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
20 February 2015 Reasons for Decision Updated medium neutral citation
Case references Updated medium neutral citation

Date of decision:  7 March 2002

Legislative References:
Income Tax Assessment Act 1997
   section 25-10

Case References:
W Thomas & Co v. FC of T
   115 CLR 58
   [1965] HCA 54

Lindsay v. FC of T
   106 CLR 377
   [1961] HCA 93

Case S13
   85 ATC 171

Phillips v. Whieldon Sanitary Potteries Ltd
   (1952) 33 TC 213

Related Public Rulings (including Determinations)
TR 97/23

Related ATO Interpretative Decisions
ATO ID 2002/291
ATO ID 2001/30

Repairs & maintenance expenses
Repairs in entirety
Rental expenses
Rental property

Business Line:  Small Business/Individual Taxpayers

Date of publication:  28 March 2002

ISSN: 1445-2782

  Date: Version:
  7 March 2002 Original statement
  20 February 2015 Updated statement
You are here 24 March 2017 Withdrawn