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Edited version of private advice
Authorisation Number: 1051952225770
Date of advice: 21 February 2022
Ruling
Subject: Rental property - deductions - repairs
Question
Are you entitled to a deduction for the rectification work carried out on the common area carpark under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The rectification work carried out on the common area carpark meets the requirements of section 25-10 of the ITAA 1997 and Taxation Ruling TR 97/23 Income tax: deductions for repairs. The commercial property is used solely for income-producing purposes, and the rectification work is a repair according to the ordinary meaning of the word. The repair is not capital in nature because it is not considered to be an initial repair or improvement, and it is not the renewal of an entirety.
This ruling applies for the following period:
The year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You own a commercial property with multiple commercial units. The commercial units are rented out at market value to unrelated parties, through an agent.
Part of the common area carpark deteriorated following above average rainfall and flooding in parts of the property, as well as continued use by heavy vehicles. The asphalt in that part of the carpark was left in poor condition and became a hazard for pedestrians.
Rectification works were undertaken on the damaged part of the common area carpark. The new material used for the carpark area was the same as the old material; asphalt was replaced with asphalt.
You have provided photos of the condition of the car park before and after the rectification works, as well as a property map showing the area which was rectified.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 25-10