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Ruling
Subject: Rental property repairs
Question
Are you entitled to claim a deduction for the cost of repainting your rental property?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You purchased a property.
You initially resided in the property.
You converted the property into a rental property and rented it through managing agents.
The managing agent has advised that the paint at the front and rear of the property will need to be re-done at some point in the not too distant future.
When the property was first rented it did not require repainting.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-10
Reasons for decision
Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs to premises held for income producing purposes, provided the repairs are not of a capital nature. Expenses of a capital nature include the replacement of an entirety, work that constitutes an improvement and work that is considered to be initial repairs.
Taxation Ruling TR 97/23 explains the circumstances in which expenditure incurred by a taxpayer for repairs is an allowable deduction under section 25-10 of the ITAA 1997.
TR 97/23 provides that, as the word 'repair' is not defined within the tax legislation, it takes its ordinary meaning. Generally, a 'repair' involves a restoration of a thing to a condition it formerly had without changing its character. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration 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.
In your case, the work to be performed on the property due to the damaged paint constitutes repairs as the work will be merely restoring the property to its former state.
The work to be undertaken will not be done to an entirety, will not be an improvement and will not be considered to be an initial repair. Therefore, you are entitled to a deduction for the cost of repairs in respect of the painting work to be undertaken on your rental property under section 25-10 of the ITAA 1997.