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Edited version of private advice
Authorisation Number: 1051671967622
Date of advice: 4 May 2020
Ruling
Subject: Rental deductions - holding costs - no rental income
Question
Are you entitled to a deduction for a portion of your holding costs you incurred while your rental property was being renovated?
Answer
Yes. The commissioner is satisfied that your holding costs are an allowable deduction under Section 8-1 of the Income Tax Assessment Act (ITAA 1997). You are entitled to claim a deduction for your holding costs for the portion of your property you intend to make available for rent.
This ruling applies for the following period:
Year ended 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You purchased the property which was tenanted on a commercial basis.
You continued to rent the property after purchase.
The property was vacated for renovation.
On completion of the renovations, you intended to rent part of the property commercially and to live in the remainder of the property.
The renovation was expected to be completed during the 20XX financial year.
The renovations have been unexpectedly prolonged, due to issues with the builder.
Part of the renovation has been completed.
Legal action is currently being taken against the builder.
The property was not rented during the 20XX financial year as the property was not fit to be tenanted while being renovated.
You lived in the partially renovated property for part of the 20XX financial year.
You only lived in the residential section of the property. You did not use the commercial section of the property.
You still intended to rent part of the property commercially on completion of the renovation.
The residential and commercial sections of the property are clearly defined.
You vacated the property in 20XX.
You rent the entire partially renovated property. You charge a reduced rate until the renovations are completed.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1