Edited version of private ruling

Authorisation Number: 1011729134204

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Ruling

Subject: Rental property - expenses

Question 1

Are you entitled to a deduction for a donation you made to an overseas disaster support fund?

Answer:

No.

Question 2

Are you entitled to a deduction for the following costs incurred in relation to your rental property:

§ purchase cost of a replacement smoke alarm battery

§ purchase and installation of replacement kitchen taps

§ purchase and installation of a replacement power point

§ purchase and installation of replacement light fittings

§ servicing of an air conditioner?

Answer:

Yes.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You made a donation to an overseas disaster support fund.

You purchased a battery for a smoke alarm.

You purchased replacement kitchen sink water taps and had them installed by a plumber. The taps were the modern equivalent of the existing taps which were damaged.

You purchased a power point (to replace a power point which was unsafe) and replacement light fittings. You paid to have the power point and lights installed.

You paid an electrician to service an air conditioner in the rental property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 30-15,

Income Tax Assessment Act 1997 Section 30-80,

Income Tax Assessment Act 1997 Section 30-85 and

Income Tax Assessment Act 1997 Section 25-10.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Donations

Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for gifts or donations made during a year to nominated funds (including prescribed private funds), authorities, institutions or bodies or classes of them, or specified persons. However, a deduction is generally not available unless the recipient is endorsed by the Commissioner as a deductible gift recipient (DGR) or specifically listed by name in the ITAA 1997 or its regulations.

Section 30-15 provides a table showing the situations where a taxpayer may deduct a gift or donation made to a recipient. Item 1 of the table states that a deduction is allowable for a gift of money given to a fund, authority or institution covered by an item in any of the tables in Subdivision 30B where:

§ the fund, authority or institution is in Australia

§ the fund, authority or institution meets either the requirements of section 30-17 or is mentioned by name in the relevant table in Subdivision 30B

§ the value of the gift is more than $2 and

§ any conditions set out in the relevant table item in Subdivision 30B are satisfied.

Sections 30-80 and 30-85 of the ITAA 1997 provide details of approved overseas aid funds to which deductible gifts may be given. The overseas fund you contributed to does not appear in these sections as an eligible DGR.

Whilst the overseas fund is located in Australia, it has not been endorsed by the Commissioner as a DGR, nor is it specifically listed by name in the ITAA 1997 or its regulations. Therefore, your donation is not an allowable deduction.

Repairs

Section 25-10 of the ITAA 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 a 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 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 states that with a repair, the work restores the efficiency of function of the property without changing its character. An improvement, on the other hand, provides a greater efficiency of function in the property. It involves bringing a thing or structure into a more valuable or desirable state or condition than a mere repair would do. The replacement of an entirety is also considered to be capital.

In your case the purchase and installation of the replacement kitchen taps, the purchase and installation of replacement lights and the purchase and installation of a replacement power point are considered to be repairs. The expenses are not improvements or the replacement of an entirety

General deductions

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

The cost of the battery for a smoke alarm and the costs incurred in having the air conditioner serviced are costs which are considered to be allowable under section 8-1 as they are costs incurred in gaining or producing your assessable income.