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Edited version of private advice

Authorisation Number: 1051823321323

Date of advice: 7 April 2021

Ruling

Subject: Rental deductions

Question 1

Are the following expenses deductible as repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997):

•         Removal of the rotted and rusted bathroom items

•         Removal of the rotted and damaged kitchen items

•         Removal of the rotted and damaged laundry items

•         Replacement of the rusted bath with like item

•         Replacement of the rotted vanity with like item

•         Replacement of broken external blinds with like item

•         Replacement of warped and rusted kitchen sink with like item

•         Replacement of rusted and dripping kitchen tap with like item

•         Replacement of rusted laundry trough with like item

•         Replacement of rusted laundry taps with like item

•         Replacement of rotted and damaged overhead cabinet with like item

•         Replacement of rusted shower rose with like item

•         Replacement of rusted shower head with like item

•         Replacement of mould damaged shower base with like item

•         Replacement of broken shower door with like item?

Answer

Yes. These works are not considered to be initial repairs or replacements of entireties; nor are they considered to be improvements. As such, the cost of carrying out these works is deductible under section 25-10 of the ITAA 1997. Further information about repairs can be found by searching 'QC 23635' on ato.gov.au

Question 2

Are you entitled to an immediate deduction for the cost of the rangehood under section 40-25 of the ITAA 1997?

Answer

Yes. As the cost of the rangehood is less than $300 you are entitled to an immediate deduction for its cost under section 40-25 of the ITAA 1997. Further information about expenses you can claim an immediate deduction for can be found by searching 'QC 23635' on ato.gov.au

Question 3

Are you entitled to a decline in value deduction under section 40-25 of the ITAA 1997 for the cost of the freestanding oven?

Answer

Yes. The oven is a depreciating asset as it has a limited effective life and can reasonably be expected to decline in value over the time they are used. As you use the oven in your rental property you are entitled to claim a deduction for its decline in value under section 40-25 of the ITAA 1997. Further information about claiming deductions for depreciating assets in residential rental properties can be found by searching 'QC 23636' on ato.gov.au

Question 4

Are you entitled to a capital works deduction under division 43 of the ITAA 1997 for the cost of:

•         a new stone kitchen bench top

•         replacing the tiles in the bathrooms, kitchen and laundry

•         new door handles in the kitchen

•         a new bathroom vanity tap?

Answer

Yes. These items are affixed permanently to the building and cannot be easily removed without causing damage. As such, they are considered to form part of the fabric of the building and are considered capital works. You are entitled to a capital works deduction for the cost of these items under Division 43 of the ITAA 1997 over 40 years at the rate of 2.5% per annum. Further information about claiming deductions for capital works can be found by searching 'QC 23636' on ato.gov.au

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You purchased a property in July 20XX.

You lived in the property until you commenced renting the property in 20XX.

The property has been rented or available for market value rent continuously since 20XX.

You currently use the services of a property manager.

The property has deteriorated over the rental period.

You were advised by your property manager the property was close to being untenantable due to the amount of damage to the bathrooms, kitchen and laundry.

You incurred the following expenses during the year ended 30 June 20XX to bring the property back to a tenantable condition:

•         Removal of the rotted and rusted bathroom items for $XXX

•         Removal of the rotted and damaged kitchen items for $XXX

•         Removal of the rotted and damaged laundry items for $XX

•         Replacement of the rusted bath with like item $XX

•         Replacement of the rotted vanity with like item for $XX

•         Replacement of broken external blinds with like item for $XXX

•         Replacement of warped and rusted kitchen sink with like item for $XX

•         Replacement of rusted and dripping kitchen tap with like item for $XX

•         Replacement of rusted laundry trough with like item for $XX

•         Replacement of rusted laundry taps with like item for $X

•         Replacement of rotted and damaged overhead cabinet with like item for $XX

•         Replacement of rusted shower rose with like item for $X

•         Replacement of rusted shower head with like item for $X

•         Replacement of mould damaged shower base with like item for $XX

•         Replacement of broken shower door with like item for $XX

•         New bath spout for $XX

•         New vanity tap for $XX

•         New bathroom tiles for $XX

•         New kitchen tiles for $XX

•         New kitchen door handles for $XX

•         New rangehood for $XX

•         New freestanding oven for $XX

•         New stone benchtop for $XXX

•         New laundry tiles for $XX

•         New shower room tiles for $XX

You did not claim any insurance to pay for the repairs, maintenance or capital works.

No changes were made to the configuration of the property, all works were solely completed to enable you to continue renting the property.

You do not intend to sell the property and intend to continue renting the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10

Income Tax Assessment Act 1997 section 40-25

Income Tax Assessment Act 1997 division 43

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