Edited version of private advice

Authorisation Number: 1052098812632

Date of advice: 21 March 2023

Ruling

Subject: Rental deductions - repairs

Question

Are the works conducted on the decking and fountain part of your patio at your overseas rental property (replacement of the subsidiary part of the fountain - the water pump, replacement of the decking, replacement of integrated lighting and replacement of integrated electrical component) deductible as repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. The Commissioner accepts that the works completed meet the requirements within Taxation Ruling TR 97/23 Income Tax: deductions for repairs (TR 97/23) to be deductible as a repair. The replacement of the subsidiary part of the fountain (the water pump), replacement of the decking, replacement of integrated lighting and replacement of integrated electrical component 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 ITAA 1997.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You purchased the property located in Country Y in early 20XX.

You lived in the property for a few years before vacating the premises.

The property was rented out in 20XX, and therefore became income producing from this time.

The current tenants have occupied the premises for just over XX year.

Damages to the deck and the fountain were discovered upon the occupation of the current tenants, having been incurred during the previous tenant's occupancy.

The fountain pump was replaced; however, the original fountain structure remains.

Of the deck, the original parts of the structure which remain after the repairs are the foundations comprising of concrete footings.

Of the decking you replaced the following parts: decking boards (which were rotted), supporting framework (which was compromised) and screws.

You replaced the decking with the same material and the works conducted did not change the character of the deck, they restored them to its former appearance and condition.

Of the integrated lighting, you have replaced two thirds (2/3) of the existing lights and reused the remaining one third (1/3).

The replacement of the lights is currently not yet complete however, the supplies to complete the works have been purchased.

Of the integrated electrical component, you have reused the electrical switch and had the position moved to a more accessible location, the rest of the electrical cabling has been replaced.

Your arguments and contentions

You have stated that you consider the "patio" to be an entirety and to consist of the deck, the fountain and an integrated electrical component which includes lighting.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 25-10