| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1011774103648
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 fac 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: Rental property expenses
Questions and Answers
Can you claim a deduction for non-capital expenditure on repairs that are carried out in the financial year which a dwelling ceases to be used for the purpose of producing assessable income?
Yes
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You rented a residential dwelling for several years
The property was vacated by tenants late in a recent year.
You needed to paint the dwelling walls
You needed to replace the dwelling carpets as they are showing traffic wear throughout the house. The carpets were 25 years old
You replaced curtain fixtures.
You incurred the expenses bin a number of months up to a recent certain date.
You have occupied the dwelling since the recent date.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 25-10
Section 40-80
Reasons for decision
Repairs to rental property are deductible expenses under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Sub-section 25-10(1) of the ITAA 1997 states that you can deduct expenditure you incur for repairs to premises (or part of premises), or plant that you held or used solely for the purpose of producing assessable income.
Taxation Ruling TR 97/23 states that ``repairs'' ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property.
Where a rental property is repaired after it is occupied by paying tenants and the need for the repairs can be related to the period during which the property was used for the purpose of producing assessable income during the income year in which the expenditure is incurred a deduction is allowable (Taxation Ruling IT 180).
Painting
According to Taxation Ruling TR 97/23 repair costs are deductible where they are incurred during the period the property is held for income producing purposes and are attributable to either:
-damage that occur during the taxpayer's income use of the property; or
-to defects that emerge suddenly during that time.
In your case the rental property needed painting due to wear and tear whilst being leased. The expense incurred for painting would therefore be deductible as a repair under section 25-10 of the Income Tax Assessment Act 1997.
Curtains and Blinds
The cost of replacing curtains and blinds is not considered a repair and therefore is not deductible under section 25-10 of the ITAA 1997.
However, the curtains and blinds in your rental property are considered items of plant and can therefore be depreciated.
As it is a depreciating asset, the expense has been incurred following a depreciation period which is not associated with an income producing activity. Therefore, there is no deduction available on the replacement curtains and blinds.
Replacement of carpet
The damage to the carpet in your rental property was caused by wear and tear, and therefore needed to be replaced. Carpet is a depreciating asset and therefore, you are not allowed to claim the cost outright. As it is a depreciating asset, the expense has been incurred during a depreciation period which is not associated with an income producing activity. Therefore, there is no deduction available on the replacement curtains and blinds.
Conclusion
In your case, your property was rented until late in a recent year. Your repair expense (repainting the walls) is deductible. Your depreciation expenses are not deductible as you no longer have an income to deduct the depreciation amounts against.