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Edited version of private advice
Authorisation Number: 1052191531505.
Date of advice: 10 November 2023
Ruling
Subject: Environmental protection expenses
Question 1
Can you deduct expenditure incurred to remove building materials containing asbestos from your investment property and replace them with functionally equivalent asbestos-free materials?
Answer
Yes.
You will rent out your investment property upon the completion of the removal of asbestos containing building materials and replacement with functionally equivalent asbestos-free materials.
Therefore, expenditure incurred to remove and replace these building materials is deductible under subsection 40-755(1) of the Income Tax Assessment Act 1997 (ITAA 1997).
Question 2
Can you deduct expenditure incurred to remove building materials contaminated with asbestos from your investment property and replace them with functionally equivalent asbestos-free materials?
Answer
Yes.
You will rent out your investment property upon the completion of the removal of asbestos contaminated building materials and replacement with functionally equivalent asbestos-free materials.
Therefore, expenditure incurred to remove and replace these building materials is deductible under subsection 40-755(1) of the ITAA 1997.
This ruling applies for the following period:
Year ending 30 June 20xx
The scheme commenced on:
1 July 20xx
Relevant facts and circumstances
You and your spouse purchased a residential property.
You purchased the property as an investment with the sole intention of renting it out to produce assessable income.
You registered the property as an investment property and paid the appropriate duties to reflect this.
You obtained asbestos testing reports which confirmed that linoleum in the kitchen and bathroom as well as the internal cladding materials used for the walls and ceilings contained friable asbestos.
The ceiling battens and insulation were also contaminated by asbestos and required replacement.
You engaged a specialist asbestos contractor with a Class A license to conduct the removal of asbestos from the premises.
You will replace the fibre cement sheeting used to clad the walls, ceilings and soffits with asbestos-free fibre cement sheeting.
You will replace the wooden ceiling battens with steel ceiling battens.
You will replace the fibreglass insulation with a polyester insulation product.
You will make the property available to rent at the market rate as soon as works have been completed and the dwelling is habitable.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-755