Private ruling: Rental property expenses
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for repair work on your rental property? | A1: Yes.


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

Reasons for decision: Summary: Section 25-10 of the Income Tax Assessment Act 1997 allows a deduction for the cost of repairs to premises used for income-producing purposes. However, subsection 25-10(3) of the ITAA 1997 does not allow a deduction for repairs where the expenditure is of a capital nature. The word 'repair' is not defined within the taxation legislation. Taxation Ruling TR 97/23 states that the word 'repair' ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. In W Thomas & Co v. FC of T (1965) 115 CLR 58 , it was held that a 'repair' involves a restoration of a thing to a condition it formerly had without changing its character. It is the restoration of efficiency in function rather than the exact repetition of form or material that is significant. In your case, you have owned the property for a number of years. You have undertaken numerous activities to repair the damage. As your property is used for income producing purposes and the work is not an initial repair, is not the replacement of an entirety and is not an improvement, a deduction is allowable.

Relevant facts: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: | • the application for private ruling; | • Body Corporate Notice of Contributions | • Water Ingress Investigation Report | You have owned a rental property for a number of years. | You have incurred expenses for work carried out as per the builders report. | The expenses were charged to you as a special sinking fund levy imposed by the Body corporate.