Private ruling: Rental property expenses
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Question and answer | Are you entitled to a deduction for expenses incurred in relation to your property prior to it being rented out? | Yes.

Relevant facts and circumstances: You purchased a rental property. You signed a rental agreement with an agent. The property was not rented out. After 1 month the agent suggested that you do renovations on the property to get a higher rent. You organised for renovations to commence on the rental property. For a period of almost 12 months the property was not rented out due to the renovations. The property was not able to be rented out during the period the property was being renovated.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. It is not necessary that the expenditure in question should produce assessable income in the same year in which the expenditure is incurred. Taxation Ruling TR 2004/4 generally provides that interest incurred in a period prior to the derivation of relevant assessable income will be incurred in gaining or producing the assessable income in certain circumstances. These principals may also be applied to other holding costs such as council rates and insurance. It is accepted you meet the relevant requirements examined in TR 2004/4 and you are entitled to a deduction for the holding costs you have incurred prior to successfully renting the property.

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