| Disclaimer This edited version has been archived due to the length of time since original publication.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 written advice
Authorisation Number: 1012922787148
Date of advice: 8 December 2015
Ruling
Subject: Rental property deductions
Question 1
Are you entitled to claim an immediate dedication for the following items in relation to your rental property in the income year they are incurred?
• gardening
• smoke/fire alarm maintenance
Answer
Yes.
Question 2
Are you entitled to a deduction for the decline in value of the cost of purchasing and installing a new screen door in your rental property?
Answer
No.
Question 3
Are you entitled to a capital works deduction in relation to the cost of purchasing and installing a new screen door in your rental property?
Answer
Yes.
Question 4
Are you entitled to a decline in value deduction in relation to the cost of replacing part of a damaged bathroom fixture in your rental property?
Answer
No.
Question 5
Are you entitled to a repairs deduction in relation to the cost of replacing part of a damaged bathroom fixture in your rental property in the year the expense is incurred?
Answer
Yes.
Question 6
Are you entitled to a deduction for the decline in value for the window dressings in your rental property?
Answer
Yes
Question 7
Are you entitled to a deduction for your travel in relation to the maintenance of your rental property?
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
The scheme commences on
1 July 2015
Relevant facts and circumstances
You have a rental property.
You have paid for the following cost in relation to your rental property:-
• gardening
• replaced a damaged screen door with a new one
• yearly fee for fire/smoke alarm inspection
• replacement part for a bathroom fixture
• replacement of old window dressings with new ones
• travel costs in relation to maintenance at the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 25-10
Income Tax Assessment Act 1997 Section 28-12
Income Tax Assessment Act 1997 Subdivision 28-C
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Section 40-25
Income Tax Assessment Act 1997 Division 43
Income Tax Assessment Act 1997 Subsection 43-25(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.
Gardening and fire inspection/fire alarm
The cost of an annual subscription to maintain smoke alarms and the adding of some plants to an already established garden are an allowable deduction where a property is being used for income producing purposes.
We accept that you have incurred costs in relation to the purchase of some plants and an annual subscription fee to maintain your rental property's smoke alarms in the course of gaining or producing assessable income.
Therefore you are entitled to an immediate deduction in the income year in which you incur the expense under section 8-1 of the ITAA 1997.
Screen door
A screen door is a separate identifiable capital item with its own function. As a consequence, it is an entirety in itself and its replacement is a renewal of the entirety.
The expenditure is capital in nature and not an expense in relation to a depreciating asset. However the expenditure is regarded as construction expenditure for which a deduction is available under Division 43 of the ITAA 1997.
Subsection 43-25(1) of the ITAA 1997 provides that the rate of deduction for capital works which began after 26 February 1992 for a residential rental property is 2.5%.
In your case, the screen door is considered to be a renewal of an entirety and you are entitled to a 2.5% capital works deduction in relation to the cost of the purchase and installation of the screen door.
Bathroom fixture
Section 25-10 of the Income Tax Assessment Act 1997 (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 a 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 damage 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.
During a property inspection you became aware that part of a bathroom fixture was damaged. You have purchased and installed a new part to replace the damaged one.
The cost to replace the damaged part is considered a deductible repair under section 25-10 of the ITAA 1997 and you are entitled to include the full cost in your income tax return.
Window dressing
Section 40-25 of the ITAA 1997 allows a deduction for the decline in value (depreciation) of a depreciating asset you hold, to the extent the asset is used for a taxable purpose.
The window dressing is regarded as depreciating assets for Division 40 of the ITAA 1997 purposes. A deduction for their decline in value is an allowable deduction when it is used for income producing purposes.
Travel and car expenses
Section 28-12 of the ITAA 1997 allows a deduction for car expenses using one of the four methods under Division 28 of the ITAA 1997. Subdivision 28-C prescribes how to calculate the deduction under the cents per kilometre method.
Generally travel expenses associated with the inspection or maintenance and repair of a rental property owned by a taxpayer, or where a taxpayer travels to collect rent, are deductible as being necessarily incurred in deriving rental income.
A full deduction will be allowed where the sole purpose of the trip relates to the rental property only. However, where travel related to the rental property is combined with other private activities the expense will need to be apportioned and the taxpayer would be entitled to only a partial deduction.
In your case your travel relates solely to the maintenance of your rental property and you are entitled to include a claim for the cost of your travel as a deduction under the cents per kilometre method.