Disclaimer
This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au

This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1011521330682

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: rental property repairs

Question 1

Are you entitled to claim a deduction for pest control treatment on your rental property?

Answer: Yes.

Question 2

Are you entitled to claim a deduction for the cost of repairs performed on your rental property?

Answer: Yes.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You purchased your home.

A building inspection was conducted at time of purchase and no termite damage was found.

You commenced renting out this property a number of years later. At this time there was no visual evidence of termite damage.

Your real estate agent discovered heavy termite damage during a routine rental inspection.

The damage was repaired and only returned to the original state and not improved in any way.

The tenants moved out of your rental property to allow work to commence to fix the termite affected areas.

All works were later completed.

New tenants moved in to your rental property.

You incurred expenses for the pest control fees, the replacement and repair costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 25-10

Income Tax Assessment Act 1997 Subsection 25-10(3)

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it.

Section 25-10 of the ITAA 1997 allows a deduction for the cost of repairs to premises used for income producing purposes. However, subsection 25-10(3) of the ITAA 1997 denies a deduction for repairs where the expenditure is of a capital nature.

Taxation Ruling TR 97/23 indicates that expenditure for repairs to property is of a capital nature where:

The meaning of repairs

Taxation Ruling TR 97/23 provides guidelines on the deductibility of repairs. Generally a repair involves a restoration of a thing to a condition and efficiency it formerly had without changing its character. Works can be fairly described as repairs if they are done to make good damage or deterioration of property that has occurred by ordinary wear and tear, by accidental or deliberate damage, or by the operation of natural causes during the passage of time.

Termite damage

In this case, you had the rental property inspected for termite damage when you originally purchased the property. The inspection confirmed there was no evidence of termite damage. A later pest inspection during the period that the property was rented showed termite problems. The cost of pest control fees incurred while the property is rented is an allowable deduction under section 8-1 of the ITAA 1997.

The work undertaken is not regarded as being capital in nature. Rather they are considered to be a repair. As the property was rented and the termite problem arose during a period the property was available for rent, the expenditure is deductible under section 25-10 of the ITAA 1997.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).