| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011674378063
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: replacement of carpet in investment property
Are you entitled to a deduction for the cost of replacing the carpet in your investment property?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts
You own an investment property jointly.
The carpet in your unit was irreparably damaged.
You had the carpet replaced.
The replacement carpet covered an identical area to the original carpet.
To the best of your knowledge the replacement carpet was of a similar quality to the original carpet.
You will not receive any insurance payout for the costs incurred in replacing the carpet.
Relevant legislative provisions
Section 25-10 of the Income Tax Assessment Act 1997
Reasons for decision
Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs made to a property that is used for income producing purposes. However, subsection 25-10(3) of the ITAA 1997 denies a deduction for repairs where the expenditure is of a capital nature.
Taxation Ruling TR 97/23 provides guidelines on the deductibility of repairs. Paragraph 15 of TR 97/23 provides that a repair generally involves a restoration of a thing to a condition and efficiency it formerly had without changing its character. 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.
TR 97/23 also provides that expenditure for repairs to property is capital in nature and not deductible under section 25-10 of the ITAA 1997 where the work results in a greater efficiency of function in the property, therefore representing an improvement rather than a repair.
In your case, you incurred costs in replacing the carpet in your investment unit when it was irreparably damaged. The area of carpet you replaced was identical in area to the damaged carpet. The replacement carpet was of a similar quality to the damaged carpet. Replacing the carpet has not resulted in a greater efficiency or function to your investment property. It has merely made good the damage. Therefore, replacing the carpets is not capital in nature.
You are entitled to claim a deduction for the costs you incurred in replacing the carpet in your investment unit pursuant to section 25-10 of the ITAA 1997.