Private ruling: Rental property
Date of advice: 13 February 2026
Published: 30 March 2026
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Can you claim an immediate deduction for the body corporate special levy instalments under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for the proportion of interest payments that relates to the cost of repairing existing waterproofing of your balcony? | A1: Yes. When the special levy notices are received or paid, you do not 'incur' debts to which you are completely subjected as the special levies are contributions to the special fund to pay for the 'expected' mutual works expenses. As such, no deductions arise at the time of receipt or payment of the notices. However, the interest of the loan at this point in time has been incurred and therefore can be deducted immediatel, provided those payments relate to the waterproofing repairs. The mutual works expenses incurred to date are 'for repairs' that are not capital in nature. The 'mutual works expenses' do not include any expenses incurred for additional internal works, in addition to the special levies. As the interest expenses are being incurred progressively, at the time the interest expenses are incurred, you will become entitled to deductions in respect of the interest expenses in amounts proportionate with your share of the total special levies payable to the special levy fund (limited by the amount of special levies you have paid, less any amounts previously deducted).

Relevant facts and circumstances: You and your wife jointly own an apartment. The apartment has a Strata Plan. The apartment was purchased in 20YY and has been leased since. Since acquisition, you have used the apartments to derive assessable income. On DD MM 20YY, the body corporate obtained a loan from a finance company to finance remedial work for the water ingress into the building. The loan repayments are distributed among owners in proportion to the owner's lot size and paid quarterly by means of a standard quarterly levy under the category of capital works fund. The most recent levy which includes the capital and interest contributions towards the loan repayment. The levy payments will continue until the loan is paid in full. You have included in your application the loan interest figures for financial years 20YY, 20YY and 20YY. You have provided the loan facility agreement. You have provided the finance letter. You have provided the general meeting minutes. You have provided the remedial work plan. Within these reports they highlight the balcony waterproofing works which include the demolition, waterproofing and tiling works. You have supplied scope of works & specification. Roof terrace works, planter boxes, balcony/common area terrace works, balcony doors / windows grading, waterproofing, tiles, cavity flashings, external walls of units adjacent to the balconies and external coatings.

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