Edited version of private advice

Authorisation Number: 1052333539912

Date of advice: 22 November 2024

Ruling

Subject: Rental deductions

Question 1

Can you claim an immediate deduction for your share of the expenditure for the works carried out on your rental property (the property) under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 2

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 Commissioner is satisfied that the expense you incurred to underpin parts of your rental property's concrete slab, was done to make good damage caused by storm water during the period that you owned the property.

As the underpinning work was partial and simply restored the efficiency of function of the property without changing its character, the work done is considered to be a repair and therefore the expense is deductible under section 25-10 of the ITAA 1997 in accordance with the principles contained in Taxation Ruling TR 97/23 Income tax: deductions for repairs.

This private ruling applies for the following period:

Year ended XX XX 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

You own a property at XXX (the property).

You purchased the property more than a decade ago.

You own the property as joint tenants with your spouse and ownership interest is on a 50/50 basis.

The property was available for rent from XX XX 20XX.

The property was available for rent for the whole income year of 20XX.

The property was rented out at market rate of rent and is comparative to nearby rentals.

The property was vacant from XX XX 20XX to XX XX 20XX while repair works were carried out.

You have not used the property for your personal use over the last X years.

You and your spouse paid for the repairs to the property.

Works were noted as being needed after the last tenants moved out and the property manager informed you of cracks on various walls inside and out.

Upon investigation the root cause of the cracks was due to a storm water pipe being dislodged and detached for a prolonged period of time causing storm water to seep under the foundation of the house resulting in movement of soil and the house sank as much as XX mm.

If the foundations of the house were not remedied urgently the house would continue to sink and would not be safe for tenants to reside in the dwelling.

The sinking foundation of the house was rectified by way of inserting X underpins to the front and one side of the house to return the foundations to their original level and prevent the house from moving further.

The purpose of the works was to remedy defects and prevent further damage or deterioration to the property.

Storm water pipes were fixed and cracks to the walls inside the house were rectified.

There was no insurance payment received for the works carried out.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10