Edited version of private advice

Authorisation Number: 1051624866298

Date of advice: 7 January 2020

Ruling

Subject: Deductions for the removal of trees and pruning of trees and shrubs

Question 1

Are you entitled to a deduction under for tree removal?

Answer

No

Question 2

Are you entitled to a deduction for the pruning of shrubs and trees?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 2018

The scheme commences on:

Year ending 30 June 2018

Relevant facts and circumstances

You purchased a rental property during the 2014 -2015 income year.

The property was left vacant until early 2018 due to unforeseen circumstances.

A Real Estate Agent was requested to manage the property in early 2018. At this time, the agent advised that tree removal was necessary to ensure safety of the tenants. The reasons given by the Real Estate Agent were as follows:

a)     some of the large trees were dead and some were partially dead

b)     Some of the tree branches hung over neighbours' fences

c)     Other branches over-hung the house and could cause damage to the roof and the building

d)     Some trees were planted along the boundary fence, too close to the house and overgrew

e)     Dead or partially dead trees posed threat to the tenants' and / or the neighbours' safety, and

f)       The trees could cause damage to sewage and plumbing pipes

Some large trees were cut down using cherry pickers. Of these trees, about half were dead. Some of the tree branches from these trees were overhanging the neighbour's fence. Other tree branches were overhanging the house with the potential to cause damage to the roof and the building.

Well over 50 trees and bushes were pruned and the branches and leaves were machine mulched.

The property was rented out from mid 2018.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 25-10

Income Tax Assessment Act 1997 subsection 25-10(3)

Reasons for decision

Removal of trees

Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for expenditure incurred to repair premises used or held solely for income producing purposes. From the information you have provided, the property is used solely for income producing purposes.

The word repair is not defined within the taxation legislation and therefore takes its ordinary meaning. In accordance with Taxation Ruling 97/23, work done to prevent or anticipate defects, damage or deterioration (in a mechanical or physical sense) in property is not in itself a 'repair' unless it is done in conjunction with remedying or making good defects in, damage to, or deterioration of, the property.

In your application, you stated that ten trees were removed to prevent damage that may occur from overhanging branches. You incurred expenses to remove these trees that had the potential to cause damage to your rental property.

However, the removal of trees is not a repair as there is no replacement or correction of defects in or damage to the trees. The trees were removed to eliminate any potential risk and are no longer in existence. As the removal of the trees is not actually repairing any damage, a repairs deduction is not allowable under section 25-10 of the ITAA 1997

Additionally, the expense is capital in nature as it is a one-off expense that provides an enduring benefit, that being, the removal of a potential hazard. As the expense is capital in nature, a deduction is also not allowable under section 8-1 of the ITAA 1997.

Pruning of shrubs

Generally, deductible expenditure incurred to maintain a rental property will be ongoing and recurrent. It is incurred to preserve the property and keep it in an acceptable condition. Taxation Ruling 97/23 outlines when expenditure incurred for repairs is an allowable deduction. Generally, something done to make good damage or deterioration occurring as a result of ordinary wear and tear or the passage of time would be a repair.

General garden maintenance is an allowable deduction where, for example, you pay someone to mow lawns, maintain garden beds or prune trees. In your situation, pruning of the large number of trees and shrubs

As the removal of the trees is not an allowable deduction but the pruning of the trees and shrubs is, you will need to apportion the expense on a reasonable basis. This apportionment may be subject to review by the Australian Taxation Office at a later date