Edited version of private advice

Authorisation Number: 1051988834189

Date of advice: 6 June 2022

Ruling

Subject: Rental - deductions

Question

Are general expenses such as insurance, interest on loan, local council water and sewage rates, land taxes and emergency services levies tax deductible on the rental property from the date it was purchased to the date it was first rented?

Answer

Yes, having considered your circumstances and the relevant factors we are satisfied that the general expenses incurred on the rental property before it was rented out meet the requirements in Taxation Ruling TR 2004/4 and are allowable deductions under section 8-1 of the Income Tax Assessment Act 1997.

Further information about expenses incurred prior to the commencement of relevant income earning activities can be found by searching QC 64907 on ato.gov.au.

This ruling applies for the following periods:

Year ended 30 June 20XX.

Year ended 30 June 20XX.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

Your intention prior to the purchase of a property was to purchase a rental property.

You made an offer for the purchase of the property (the property).

At the same time, you purchased landlord insurance.

A short time later settlement occurred on the property.

Whilst the property could have been rented immediately after purchase, you renovated the property prior to renting it out to make it more appealing to tenants.

Shortly after the property was purchased you received multiple quotes for the replacement of the roof.

A plasterer was engaged to install the gyprock to the block walls.

You received an invoice from the plasterers and the painting of the house begins.

Approximately six months after receiving the quote the roof replacement commenced.

The roof replacement was completed.

Approximately 12 months after you purchased the property you emailed your real estate agent for the first time regarding the rental of the property.

During the final stages of painting, it was discovered that the gyprock had not adhered to the painted block walls and a total tear down and replacement of the gyprock was required.

The renovations to the property were delayed due to the following:

• weather delays
• contractor availability, and
• building supply shortages.

After renovations were complete you contacted the real estate agent again

The property was advertised for rent.

Nearly one year and six months after the purchase of the property the property was rented.

The property is currently rented.

During renovations - from time the property was purchased to the time the property was rented - the property remained vacant and was not used for any other purpose.

The expenses incurred that you want to claim as a deduction for the 20XX financial year, prior to the property being rented, are the following:

• Interest on the loan
• Insurance
• Council rates.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 25-10