Private ruling: Repairs undertaken in a commercial rental property.
Date of advice: 6 June 2018
Published: August 2018
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the expenditure incurred by me as a taxpayer for repairs an allowable deduction under Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Section 25-10 of the ITAA 1997 allows a deduction for the cost of repairs to premises used for income producing purposes. You repaired one third of the roof in your commercial property. The roof being considered a component of the building and the building itself was the entirety. The use of like material relevant to the era to replace that which had deteriorated would not constitute an improvement as it did not improve the efficiency of function of the property. There is hence a distinction between repair and improvement in this instance. The replacement of the roof sheeting is considered a repair functionality as the section of roofing replaced has been restored and a deduction is allowed.

Relevant facts and circumstances: The commercial building was built in the XXXX’s and is located within a greater local council heritage zone whereby conditions are placed on any alterations and additions (including minor additions such signage). The building in its entirety comprises three roof sections plus veranda. The claim is in respect to one (of three) section of roof covering in its ability to provide efficient function of protection from weather and animals. Building leaseholders had been adversely impacted on several occasions by water ingress during storm weather conditions. The building was leased prior to the deterioration of the roof. It became apparent that one section of the roof structure had deteriorated to the point of no longer providing a waterproof covering to the building envelope and required repair. Development application was lodged by the registered builder with Y for ‘Replacement of roof sheeting to building’ on X XXX 20XX and was approved on XX XXX 20XX. Contained within the development plan consent were conditions specified by Z to (as best) match materials as per existing arrangement in order to ‘provide roof sheeting and rainwater goods compatible with roofing typical to the era of the heritage significance’. The builder commenced repair work on XX XXX 20XX. The final invoice for the repair work was issued on XX XXXX 20XX. As a consequence of conditions placed within the development plan consent, and the unexpected state of deterioration of roof purlins, the materials required and method of application was of considerable cost to the applicant. Supporting documentation pertaining to the development application and payments for the repairs were provided.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-10