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Edited version of private advice
Authorisation Number: 1052400747486
Date of advice: 27 May 2025
Ruling
Subject: Rental - deductions
Question 1
Can the cost of partially underpinning your rental property be claimed as an immediate deduction under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer 1
Yes.
Section 25-10 of the ITAA 1997 provides that you can deduct expenditure you incur for repairs to premises that you held solely for the purpose of producing assessable income to the extent of your legal ownership in the property.
The underpinning work will involve the installation of concrete pads in specific areas of the property to stabilise existing footings and minimise further wall movement and cracking. Not all sides of the building will be underpinned.
As the underpinning work will be partial and simply restore the efficiency of function of the property without changing its character, the work is considered to be a repair and therefore the expense is deductible under section 25-10 of the ITAA 1997 in accordance with the principles contained in Taxation Ruling TR 97/23 Income tax: deductions for repairs.
This private ruling applies for the following periods:
Year ending XX XX 20XX
Year ending XX XX 20XX
The scheme commenced on:
XX XX 20XX
Relevant facts and circumstances
You own the property at XX XX, XX (the property).
You purchased the property in XX.
The property was available for rent from XX XX 20XX.
The property was used for private purposes prior to being rented out.
The property was available for rent for the whole income year of 20XX.
The property was rented out at the market rate of rent ($XX/week) and is comparable to nearby rentals, and it was managed by XX.
The property has shown visible damage over the past two years, including cracks and foundation sinking, which became more severe during the summer of the 20XX income year. This appears to be due to dry weather conditions and invasive tree roots from council-owned trees on the footpath.
Informal assessment conducted by a structural engineer indicated that remedial works-including underpinning of the foundation-are necessary to prevent further structural movement and damage. These measures are considered important to maintain the safety and structural integrity of the property.
Actual work has not yet commenced.
A quote has been provided outlining the scope of works, which includes XX underpins. The underpinning will not extend to all sides of the building.
No significant repairs have been undertaken on the property, apart from routine maintenance activities.
The cost of the underpinning will not be covered by insurance.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 25-10
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