Edited version of private advice

Authorisation Number: 1051943626594

Date of advice: 27 January 2022

Ruling

Subject: Rental deductions - repairs and maintenance

Question

Are you entitled to claim a deduction for the cost of the roof replacement for your investment property?

Answer

Yes.Your expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible. Further information about repairs can be found by searching QC 23635 at ato.gov.au. The roof replacement is not considered to be a renewal or reconstruction of an entirety, it is not an initial repair, or an improvement and the expense is in respect to an income producing asset. Therefore, your expenses are deductible under section 25-10 of the Income Tax Assessment Act 1997.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You own a XX% interest in an investment property. The property has been used solely for income producing purposes and the property has been rented out your whole ownership period.

A severe weather event with torrential rain and gale-force winds occurred in XX. The area the property is situated in was declared a disaster zone by the state government.

The severe weather event caused roof damage. The SES were required to install tarp on the roof to prevent further water damage to the property.

The damage which occurred to the roof included broken/cracked roof tiles, leakages from multiple areas and substantial sarking. The original material used for the property's roof was concrete tiles.

The condition of the roof at the time of transfer of ownership to you was serviceable and in good condition with respect to the building's age.

You were not able to find a roofing contractor to undertake the roof replacement with tiles within a reasonable period. Therefore, you sought a roofing contractor who replaced the roof with Colorbond.

You engaged a roofing contractor to rectify the damage to the roof. The roofing contractor provided a tax invoice for $XX including GST and provided the following findings:

•         Roof inspected and findings show due to significant indoor water leakage from multiple areas after severe storm (natural disaster area declared)

•         Damaged roofing and sarking areas found not to be economical to repair individually, roof replacement recommended/carried out.

The roofing contractor carried out the supply and install of the roof.

You did not receive any monetary payments from your insurance company.

Relevant legislative provisions

Income Tax Assessment Action 1997 Section 25-10