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Edited version of private ruling
Authorisation Number: 1011631953097
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Ruling
Subject: Rental property expenses
Are you entitled to a deduction for the electrical work done to your rental property?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Relevant facts
You purchased a rental property in 2002, and it has been leased continually since then.
You recently had an electrical installation at the property and the electrician who you contracted for the electrical work informed the tenant that the electrical wiring in the house was unsafe and should be replaced for safety reasons.
You instructed the agents to arrange for a qualified electrician to conduct a full inspection of the wiring at the property and quote for any repairs/replacement to make it safe.
You understand the wiring is clad in a non-plastic material dating from the 1950-60's.
The quote included rewiring lights, upgrading mains, switchboard, meter panel, earth system, and installing all circuits on to separate safety switches.
You are the sole title holder to the property.
Reasons for decision
Section 25-10 of the Income Tax Assessment Act 1997 allows a deduction for the cost of repairs to premises used for income producing purposes, to the extent that the expenditure is not capital in nature.
Taxation Ruling TR 97/23 provides guidelines on the deductibility of repairs. Generally, a 'repair' involves restoration of a thing to a condition it formerly had without changing its character. Works can be fairly described as 'repairs' if they are done to make good a defect in, damage to 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.
The replacement of the electrical wiring is not considered to be an entirety, as it is incapable of providing a useful function without regard to any other part of the premises and is not a separate and distinct item of plant in itself apart from the thing or structure which it serves. Also, replacing the aged wiring is not considered an improvement as the work done merely returns it to the condition it was in before the need for the work arose. The expense you will incur in replacing the electrical meter box is also considered to be a repair. It will be incurred in order to restore efficiency in function, not to improve.
Therefore, you are entitled to a deduction for the electrical work done to your rental property.