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Edited version of your private ruling
Authorisation Number: 1012531073248
Ruling
Subject: Timing of repairs
Question
Are you entitled to a deduction for repairs on a rental property after it has ceased producing assessable income?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
You have a rental property which was left in a bad state after the tenants left the property.
The tenants vacated the property in July 2012 and you undertook the repairs after they had left.
The work carried out was to restore the property to its former condition.
None of the work carried out was of a capital nature or considered improvements.
There were problems with the property after the repairs were completed and you decided to put the property up for sale.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-10
Reasons for decision
Section 25-10 of the Income Tax Assessment Act 1997 states expenditure incurred by you for repairs to premises used for the purpose of producing assessable income is an allowable deduction. However, a deduction is not allowable if the expenditure is of a capital nature.
In some circumstances, you are able to claim a deduction for repairs even after the rental property has stopped producing assessable income. These circumstances are discussed in Taxation Ruling IT 180. A deduction may be allowed for the cost of repairs providing the necessity for the repairs can be related to a period of time during which the property was producing assessable income. In addition to this, the property must have been used for income producing purposes in the financial year in which the expenditure for the repairs was incurred.
In your case, it is accepted that the necessity for the repairs was attributable to the period of time that the property was rented. As your property was income producing in the 2012-13 income year, a deduction is allowed for the repairs undertaken in that income year.
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