Edited version of private advice

Authorisation Number: 1052200537260

Date of advice: 13 December 2023

Ruling

Subject: Deduction - repairs

Question 1

Can you claim a deduction for the following repairs to your rental property under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. You can claim an immediate deduction in the income year you incurred the repair (or maintenance) expenses for the garden maintenance, replacement roof tiles, cleaning of roof, gutters, pavers, retaining walls & purchase of cleaning chemicals, repaired dishwasher door, removal of mould and the repainting of the house.

Question 2

Can you claim a capital allowance deduction for the following items in your rental property under section 40-25 of the ITAA 1997?

Answer

Yes. You can deduct an amount equal to the decline in value of a depreciating asset that you held at any time during the year that you use for a taxable purpose. You purchased the new rangehood, NBN battery, venetian blinds, and laminate flooring. Immediate deductions are not available for depreciating assets as they must be claimed over the useful life of the asset over a number of years.

Question 3

Can you claim the following capital works deductions for your rental property under Division 43 of the ITAA 1997?

Answer

Yes. You can deduct certain kinds of expenses that are capital or of a capital nature such as the new window and sliding door rollers, new water downpipes, replacement LED light, new toilet, glass backsplash, sliding door screen and new door handles. Immediate deductions are not available for these expenses as fixtures and capital assets are considered part of the entire building itself and must be claimed over a number of years, usually 2.5% each year over 40 years.

For more information on rental properties refer to our website ato.gov.au and search for quick code QC '23636'.

This ruling applies for the following period:

Year ended DDMM20YY

The scheme commenced on:

DDMM20YY

Relevant facts and circumstances

In DDMM20YY, you purchased a property located at X (The Property).

The Property has been continuously rented out since purchase date, aside from the period where the repairs which were caused by the previous tenants, were completed.

You had a tenant who moved in on DDMM20YY and then abandoned the Property on DDMM20YY before the end of the agreed rental period.

In DDMM20YY the tenant reported a leak in the kitchen. You asked the property manager to provide more details, a few weeks later he advised the leak was in the dining room around the skylight.

The tenant left the Property with substantial damage and there were numerous issues that needed addressing.

The property manager engaged failed to provide a written outgoing inspection report that would have identified all the damage to the Property, and his previous monthly inspections failed to note any damage that had already occurred.

You were only able to ascertain the full amount of damage to the Property upon your own inspection, and verify the damage was caused whilst the Property was rented by the tenant prior to DDMM20YY.

You initially called the skylight manufacturer in MM20YY, but for personal reasons they were unable to come to the Property to assess the damage.

You contacted your insurance company, and several months later they advised the leak was due to roof maintenance issues, and these needed to be completed before the inside repairs. The leak had led to a mould infestation occurring in the house.

You had difficulty in engaging tradespeople for several of the issues as they were heavily booked, and they considered some of the jobs too small for them to accept.

In MM20YY, you engaged a company who completed the work to remove the mould from the house.

You then engaged a painter, however as they were coming to the end of the painting, the skylight started to leak again.

It wasn't until MM20YY that the skylight manufacturer sent a specialist who repaired the seal and stopped the leak.

You were then able to continue with the remaining repair work on the Property.

Your intention was for the Property to remain as a rental property after the repairs were completed and you did not use the Property for private purposes.

Once the repair works were completed you then sought suitable tenants to move back into the Property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 40-25

Income Tax Assessment Act 1997 Division 43