Private ruling: Rental deductions and special levies
Date of advice: 14 January 2026
Published: 9 March 2026
Ruling period: Year ended DD MM YY | Year ending DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Is the special levy you paid to the body corporate for repairs to the strata title complex where you own a rental unit deductible in the year they were incurred under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997), where those costs are proportioned for the remedial works that have been completed and paid for by the body corporate? | A1: Yes. Your expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible, where the repairs have been completed and paid for. They are deductible in the period in which they are paid for.

Relevant facts and circumstances: You own a unit in a complex of units (strata title) which you rent out as an investment property. It is located at Address A. You acquired the unit in MM YY and it has been fully tenanted since then. You did not get a building inspection done when you acquired the property as it was purchased off-market. Damage from water ingress into the complex was first noticed in YYYY. The units in the complex have been inundated with water whenever it rains due to failed waterproofing membranes around balconies, doors, and windows. This has resulted in wet and ruined carpets and timber floors, rotting of skirting boards, spalling of concrete rendered walls, and the development of mould. On DD MM YY, at a general meeting of owners in the strata title, a motion was made and resolved that all owners would be required to pay a special levy to raise a 'Capital Works Fund'. A further motion was made and resolved that this 'Capital Works Fund' would be used (initially) to fund remedial repair work and the committee was authorised to source quotations and contractors to undertake the works. The strata management had developed and provided to all owners a 'Summary of remediation works and approaches'. This document detailed the remedial repair work but also future repairs, upgrades, and improvements that could be made around the complex. It addressed several methods of funding these. On DD MM YY Consulting Firm A provided the strata management with an engineering report generated following an inspection conducted on DD and DD MM YY. The report identified issues with specific units as well as the complex roof and underground carpark. It identified water penetration in multiple units and common spaces and detailed the damage this had caused. The report identified the need for further testing to determine the reason for the water ingress and suggested flood testing. On DD MM YY Consulting Firm A provided the strata management with a report following flood testing and an investigation that was conducted on DD and DD MM YY. This report attributed the water ingress to: • Poor workmanship during the installation of cavity flashings, damage to same, and debris within the cavities, • Cavity flashing/weep holes installed at ground level, • Deterioration/failure of the waterproof membrane applied to the balcony concrete slabs, • Poorly/inadequately detailed waterproofing membranes to the balcony concrete slabs, • Deterioration of the seals/gaskets of windows and clogging of the drainage weep holes, • Poor drainage design to the ground floor paved courtyards. On DD MM YY Consulting Firm A provided the strata management with a tender evaluation report for the remedial works. Submissions were obtained from 4 specialist remedial building contractors. Building Firm A were engaged to undertake the work. This would be undertaken in stages and the strata management would make progress payments throughout. On DD MM YY you were invoiced for your share of the levy which was $X. Payment was due on DD MM YY but advice was provided that you had one month to pay without incurring any interest or fees. On DD MM YY the strata management was provided with a progress report that detailed the following works had been completed: • For 2 of the units all pavers and sub-paver bedding had been removed to expose the structural concrete substrate and the waterproofing membrane had been stripped back, • New cavity flashings had been installed and these were installed with the correct falls towards weep holes to facilitate drainage, • Brickwork and render above the flashing line were in process to the original profiles and securely sealed, • Reglet flashings had been installed where the membrane termination interfaces with planter box walls and boundary walls to prevent water migration. These were all sealed with high-performance polyurethane sealant, • All relevant surfaces were pressure cleaned, vacuumed and ready for the application of the bituminous waterproofing system On DD MM YY the strata management was provided with a progress report that detailed the following works had been completed: • In one of the penthouses a new waterproofing membrane had been installed, new doors, as well as the installation of screed in preparation for tiling, and all cavity flashings were complete, • In another penthouse both balconies had been tiled and were scheduled for grouting that day as well as new doors had been installed, • In one unit all doors and windows had been installed and all cavity flashings were complete, • In another unit all doors had been installed and all cavity flashings were complete, • In a different unit all doors had been installed and all cavity flashings were complete, • Across the whole complex all membrane works were complete and all window joinery almost finalised.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1, | Income Tax Assessment Act 1997 Section 25-10 and | Income Tax Assessment Act 1997 Subsection 25-10(3)