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Edited version of your private ruling
Authorisation Number: 1012604310936
Ruling
Subject: Rental property expenses
Question 1
Are you entitled to a deduction for a portion of a mortgage discharge fee you paid in the 2013-14 financial year?
Answer
Yes.
Question 2
Are you entitled to a deduction for the replacement of a broken ceiling fan in the 2013-14 financial year?
Answer
Yes.
Question 3
Are you entitled to a deduction in the 2013-14 financial year for the replacement of several broken doorknobs?
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2013
The scheme commences on
1 July 2013
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You solely own an investment property.
You purchased the property in late 200X and lived in it for the first X months.
This property became a rental property in the first half 20XX and has been used as a rental property to date.
You have paid a mortgage discharge fee.
You have replaced a broken ceiling fan light with a new one.
You have replaced several broken internal doorknobs with new ones.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-10
Income Tax Assessment Act 1997 Subsection 25-30(3)
Income Tax Assessment Act 1997 Section 40-25
Income Tax Assessment Act 1997 Subsection 40-30(1)
Reasons for decision
Mortgage discharge expenses
Mortgage discharge expenses are the costs involved in discharging a mortgage other than payments of principal and interest. These costs are deductible under subsection 25-30(3) of the Income Tax Assessment Act 1997 (ITAA 1997) in the year they are incurred to the extent that you took out the mortgage as security for the repayment of money you borrowed to use to produce assessable income.
For example, if you used a property to produce rental income for half the time you held it and as a holiday home for the other half of the time, 50% of the costs of discharging the mortgage are deductible.
You are entitled to claim the mortgage discharge fee in the 2013-14 financial year, but you will need to apportion the expense on a reasonable basis.
An example of how to calculate the allowable deduction would be as follows:-
mortgage discharge cost multiplied by the number of months the property used for income producing purposes divided by the total number of months the property has been owned (as at the time of discharge)
Doorknobs
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 Income tax: deductions for repairs, 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 replaced the door knobs on several internal doors as they were defective. This is considered to be a repair to the doors and not a replacement therefore; the cost of the doorknobs is a deductable expense in the year it is incurred.
Ceiling fan
A deduction is allowable under section 40-25 of the ITAA 1997 for the decline in value of depreciating assets within the definition of subsection 40-30(1) of the ITAA 1997. Depreciating assets have a limited effective life and can reasonably be expected to decline in value over the time they are used in the rental property.
The decline in value of certain depreciating assets costing $300 or less is their cost. This means you get an immediate deduction for the cost of the asset to the extent that you use it for a taxable purpose during the income year in which the deduction is available.
In your situation you have replaced a broken ceiling fan with a new fan. Ceiling fans are depreciating assets. As the cost of the purchasing and installing the fan was less than $300 you are entitled to claim the full cost in the 2013-14 financial year.