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Edited version of private advice
Authorisation Number: 1052299267744
Date of advice: 18 September 2024
Ruling
Subject: Rental deductions
Question 1
Can you claim an immediate deduction for works carried out on your rental property, listed in Table A under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Section 25-10 of the ITAA 1997 provides that you can deduct expenditure you incur for repairs to premises that you held solely for the purpose of producing assessable income to the extent of your legal ownership in the property.
The items listed in Table A satisfy the Commissioner's requirements for deductibility under section 25-10 of the ITAA 1997, therefore you can claim a deduction for these items in the year the expense was incurred. For more information see the taxation ruling TR 97/23.
Question 2
Can you claim a deduction for the decline in value for the items replaced at your rental property listed in Table B under section 40-25 of the ITAA 1997?
Answer
Yes.
The floating timber floor is considered a depreciating asset. Depreciating assets are items that can be described as plant, which don't form part of the premises, the replacement of which is deductible under section 40-25 of the ITAA 1997. Therefore, expenditure incurred to replace the floating timber floor will be deductible under section 40-25 of the ITAA 1997.
This ruling applies for the following periods:
Period ended 30 June 20XX
Period ended 30 June 20XX
The scheme commenced on:
1 June 2020
Relevant facts and circumstances
You have a rental property at XXXXXXXXX (the property).
The property was damaged in a flood.
Tenants moved out of the property due to flood damage.
The building report stated that there was a health hazard due to the presence of mould and fungus in the lower parts of the wall, skirtings, and floors.
The residential tenancy agreement requires that the rental property and premises not be subject to health and safety risks.
You obtained builders quotes and submitted a claim to your insurance company.
An Insurance claim was processed from XX April 20XX to XX December 20XX.
Your Insurance company paid out the insurance claim directly to you in the amount of $XX, XXX. XX.
You then paid your builder this amount as outlined in the Builders Quote Invoice number XXX/XX dated X July 20XX.
You incurred expenses to conduct the works listed in Table 1 and Table 2 below:
TABLE 1
Table 1: You incurred expenses to conduct the works listed in Table 1:
|
Replacement of damaged permanent flooring |
|
Skirting boards and architraves repair/replace as required |
|
Repair of upper level flooring |
|
Ceiling and cornices repair/replace as required |
TABLE 2
Table 2: You incurred expenses to conduct the work listed in Table 2:
|
Replacement of floating floor |
Repairs were completed by XX February 20XX.
Property was back on the rental market on XX February 20XX.
The property was rented out in the income years that rental income was received.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 25-10
Income Tax Assessment Act 1997 section 40-25