Edited version of private advice

Authorisation Number: 1052313914779

Date of advice: 04 October 2024

Ruling

Subject: Rental property deductions

Question 1

Are you entitled to a deduction for the expenses you incurred in relation to your rental properties for the 20XX income year, as submitted in your income tax return for the income year, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes.

You are entitled to claim the expenses you incurred as a deduction under section 8-1 of the ITAA 1997.

Your intention is to repair and locate tenants for both properties and continue deriving rental income. The temporary cessation of income-producing activity does not break the nexus between your outgoings and production of assessable income.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You own two rental properties.

Property One was purchased in 19XX and has been used as a residential rental property since acquisition.

The most recent tenant of Property One commenced renting the property in 20XX.

In 20XX, the tenant experienced some health issues and began falling behind in their rental obligations and maintaining the property. You engaged with gardeners, tradesman, and cleaners to secure the property and residence and to clear the grounds.

During 20XX and 20XX, it became difficult to contact the tenant to have discussions with the regarding arranging alternative accommodation, arranging inspections of the property, and arranging tradesman to the premises.

In XX/20XX, you were able to arrange an inspection of the premises and found out that the tenant had passed away.

You discovered that Property One was uninhabitable despite several weeks of cleaning by the tenant's family, and it was not possible for you to obtain a tenant for the premises.

You intend to restore the premises and place the property back on the rental market once this has been completed.

Property Two was purchased in 20XX and has been used as a commercial rental property since acquisition.

Property Two was leased and was occupied by tenants in XX/20XX.

Shortly after Property Two was acquired, you engaged with several specialists in pursuit of upgrading the property.

The tenants who occupied Property Two vacated the premises in XX/20XX and removed all fixtures and fittings, leaving the property empty.

You recently engaged with a real estate agent to locate a tenant for Property Two.

You incurred expenses for Property One and Property Two in the 20XX income year and included them in your income tax return for the year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1