| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012047258739
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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Rental property deductions
Rental property deductions
Question
Are you entitled to claim a deduction for electricity, gas and travel expenses incurred for your rental property before it was rented out?
Answer
No
This ruling applies for the following period
Year ending 30 June 2011
The scheme commences on
1 July 2010
Relevant facts and circumstances
You own a property which was your main residence for many years. You moved out and decided to rent it out.
The property was renovated and modernised to make it suitable for rent. The work was carried out over a period of time in 2009 and 2010.
You incurred costs for electricity, gas and travel during the renovation period.
The electricity and gas remained connected to enable the renovation work to be carried out.
You travelled to the property to carry out some work yourself and to provide access for tradesmen.
A real estate agent was engaged in 2010. The property was tenanted from late in 2010.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (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.
Expenses incurred on a rental property that produces assessable income may be deductible under section 8-1, and certain expenses may be deductible prior to the property being available for rent. These include holding costs such as local council, water and sewage rates and land taxes.
Other types of expenditure, including capital works, are not deductible. Capital expenditure includes renovations, substantial improvements, alterations and modernisations.
In your case, you undertook renovations and substantial improvements to your property to make it suitable to rent out. This work is capital in nature and the costs of carrying out the work are not deductible. Any costs related to capital works are also capital in nature and not deductible.
You incurred costs for electricity, gas and travel, which were only incurred to allow the capital works to be carried out. These costs are capital costs and are not deductible under section 8-1 of the ITAA 1997.