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Edited version of your written advice
Authorisation Number: 1013101002932
Date of advice: 30 September 2016
Ruling
Subject: Rental property - repairs and maintenance
Question
Are you entitled to claim a deduction for the installation of a pest barrier at your rental property?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 20YY
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You have owned a rental property for many years. The property has always been used to produce assessable income.
During the 20XX-YY financial year, a pest inspection was undertaken on the property. Some pest infestation was found, however the report also indicated there may be further damage which was not apparent. The report recommended the installation of a pest barrier to treat any other current infestation which had not been located, and to prevent any further damage to the property.
The pest barrier involves drilling holes which are filled with pesticide, and trenching and flooding the footings of the dwelling with pesticide.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
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.
Where a person has a rental property, the person can claim a deduction for certain expenses they incur in the period the property is rented or available for rent.
Generally expenses incurred for maintenance work are allowable deductions. Paragraph 20 of Taxation Ruling TR 97/23 provides the following:
Some kinds of maintenance works are 'repairs' in terms of section 25-10, for example, painting plant or business premises to rectify existing deterioration and to prevent further deterioration. Other kinds of maintenance work, such as oiling , brushing or cleaning something that is otherwise in good working condition and only requires attention to prevent the possibility of its going wrong in the future, are not 'repairs' in terms of the section. Expenditure on the latter kind of maintenance work may be an allowable deduction under section 8-1.
Pest inspections and control is considered to be maintenance work. Inspections are usually performed to identify potential damage caused by pests and control is undertaken to eradicate or prevent pests before they cause damage or deterioration to property. This would be considered an allowable deduction while the property is used to produce assessable income.
In your situation you were aware that pests were active in the area and consequently, you incurred costs in having the property treated for pests in order to protect it from future damage. The pest treatment is an ongoing preventative measure you have taken in protecting your rental property.
It is considered that the pest control expenditure is part of the general maintenance of that property and is therefore deductible under section 8-1 of the ITAA 1997.
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