Edited version of private advice

Authorisation Number: 1052253228107

Date of advice: 4 June 2024

Ruling

Subject: Rental deductions and repairs

Question

Can you deduct the portion of the special levy paid to the body corporate for repairs to your rental property that are not initial repairs under section 25-10 of the Income Tax Assessment Act 1997(ITAA 1997)?

Answer

Yes. You can claim an immediate deduction in the income year you incurred the repair (or maintenance) expenses for the waterproofing and tiling of balcony, replacing sealant joints, drainage works, spalling concrete, render repairs, repainting, crack stitching repairs, gable wall and planter box repairs, removal of hot water unit enclosure (necessary to access balcony to repair) and the portion of access and preliminaries costs that relate to repairs.

Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs made to premises or depreciating assets used solely for producing assessable income.

However, subsection 25-10(3) of the ITAA 1997 denies a deduction for repairs where the expenditure is of a capital nature. An improvement to a property would be capital in nature and is therefore not deductible.

Taxation Ruling TR 97/23 Income tax: deductions for repairs provides guidelines on the deductibility of repairs. Generally, a 'repair' involves a restoration of a thing to a condition and efficiency it formerly had. 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.

This ruling applies for the following period:

Year ended DD/MM/20YY.

The scheme commenced on:

DD/MM/20YY

Relevant facts and circumstances

You purchased the property at XXX on DD/MM/20YY.

The property has been rented since purchase; it has not been used as a private residence at any time.

The property is located within a complex of units under a strata title ownership structure.

At the request of the Strata Manager on behalf of the Executive Committee, an engineering services company were engaged to inspect and report on the structural conditions of the balconies in the block of units at XXX.

The objective of this Structural Condition Report was to identify and assess structural defects in the existing balconies, which may compromise integrity, safety, and serviceability in the short and long-term, and to give recommendations for any remedial works required.

XXX were contracted to undertake the necessary works.

The building works involved every owner in the strata plan, which consists of 9 units in total.

All works relating to this project were completed between MM/20YY and MM/20YY.

You paid five instalments to a special levy fund during the 20YY tax year, totalling $XXX as your share.

The tenants were able to remain living in the property whilst the building works were carried out.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10

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