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Edited version of private advice
Authorisation Number: 1051593694908
Date of advice: 14 October 2019
Ruling
Subject: Rental deductions
Question
Are you entitled to a deduction for rental property expenses?
Answer
Yes
It is considered that there is a sufficient connection between your expenses and the earning of your assessable income. The Commissioner is satisfied that the nexus between the outgoing and the relevant income earning activity has not been broken.
This ruling applies for the following period:
Year ending 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
5 June 20XX
Relevant facts and circumstances
You purchased a home unit as an investment property in 20XX and it has been rented on a continuous basis with no private use.
Since you have owned the property a number of significant building defects have been found.
During the last tenancy there was a fire in one of the bedrooms and the tenant was forced to move out.
The insurance company initially approved the repairs however evidence of water in the wall cavity was found due to a defect in the external cladding.
Subsequently the repairs were unable to be carried out and the insurer refuses to carry out the repairs until the building defect is rectified.
There is a dispute as to who is responsible for fixing the defects and as a result the owners' corporation and the unit owners commenced proceedings through the relevant state government authority to have the issue mediated with the builder who denied liability for the cladding defect. The matter is still before the authority.
You will rent the property as soon as the repairs are complete and seek compensation from the builder through the state government authority for loss of rental income.
You have incurred expenses for the property while waiting for the repairs to be completed.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8(1)
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Division 43