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Edited version of your private ruling
Authorisation Number: 1012436654269
Ruling
Subject: Rental property expenses
Question 1
Are you entitled to claim the decline in value of a dishwasher as rental property expenses?
Answer
Yes.
Question 2
Are you entitled to claim a deduction for the replacement of a handtowel ring and two power points and re-grouting of the shower, including labour, as rental property expenses??
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commenced on
1 July 2012
Relevant facts and circumstances
You own a rental property.
You have incurred costs for the following:
· Dishwasher
· Replacement handtowel ring
· Two replacement power points
· The shower was re-grouted due to a water leakage
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1,
Income Tax Assessment Act 1997 Section 40-25,
Income Tax Assessment Act 1997 Subsection 40-30(1),
Income Tax Assessment Act 1997 Subsection 40-80(2)
Income Tax Assessment Act 1997 Section 25-10.
Reasons for decision
Decline in value
Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) contains provisions which allow you to claim a deduction for the decline in value (depreciation) of depreciating assets which are used in the production of assessable income.
Section 40-25 of the ITAA 1997 allows you to deduct from your assessable income an amount equal to the decline in value of a depreciating asset to the extent that it is used to produce assessable income or installed ready for use for that purpose.
A depreciating asset is an asset that has a limited effective life and can be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997).
Subsection 40-80(2) of the ITAA 1997 provides that the decline in value of a depreciating asset will be the cost of the asset if the cost of the asset does not exceed $300 and the asset is used predominantly for the production of assessable income.
The dishwasher is a depreciating asset, therefore, a deduction is allowable for the decline in value of the dishwasher.
According to the Rental Properties Guide 2012 if you have purchased the dishwasher after 2004, you can depreciate it over a period of 10 years while the property is income producing.
Deduction
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 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 a defect in, damage to 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.
You have had two power points and a handtowel ring replaced. The cost of the items and the cost of the labour to install them are considered together. The shower was also re-grouted.
The work done by replacing these items and re-grouting the shower is not an initial repair, does not result in greater efficiency of function and is not a renewal or reconstruction of an entirety. Therefore, the replacement of the two power points, the towel ring, and re-grouting of the shower and are considered to be repairs which are deductible under section 25-10 of the ITAA 1997.