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Edited version of private ruling
Authorisation Number: 1011524214189
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Ruling
Subject: Rental expenses
Are you entitled to claim a deduction for repair work undertaken on your property in the income year after it ceased to be income producing?
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You rented your home for a period.
Your tenants moved out and the home has not been rented since.
The home required a paint job when the tenant vacated.
The painting of your home was completed and fully paid.
Your family moved into your home.
The property was used as a main residence for your family.
No rental income was received in the income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-10.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
The deductibility of repairs to an investment property falls for consideration under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997). The provision states you can deduct expenditure you incur for repairs to premises (or part of premises), or a depreciating asset that you held or used solely for the purpose of producing assessable income.
The cost of repairs to a property after cessation of income producing use is covered in Taxation Ruling IT 180. Paragraph 4 states that a deduction may be allowed for the cost of repairs to property providing:-
(a) the necessity for the repairs can be related to a period of time during which the premises have been used to produce assessable income of the taxpayer, and
(b) the premises have been used in the production of such assessable income of the year of income in which the expenditure is incurred.
In applying the principles expressed in IT 180, a deduction for repairs will only be allowed if the property has also been used for the production of assessable income during the year in which the expenditure is incurred. Although some of the work may be attributable to the period of time that the property was being used to produce rental income there will be no income earned from the property in the income year.
Therefore, you are not entitled to claim a deduction for the costs of painting your home.
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