Private ruling: Income tax - rental property expenses
Date of advice: 16 December 2020
Published: March 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: XX November 20XX

Ruling: Q1: Are you entitled to a deduction for the cost of removing and disposing of asbestos from your rental property? | A1: Yes. Your expenses meet the requirements in Taxation Ruling TR 97/23 and Taxation Ruling TR 2019/D3 and are deductible. Further information about repairs relating to asbestos-affected properties can be found by searching 'QC 43708' on ato.gov.au | Q2: Are you entitled to a deduction for the cost of the accompanying rework to rectify the rental property and building it back to its original state? | A2: Yes. Your expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible. Further information about repairs can be found by searching 'QC 23635' on ato.gov.au

Relevant facts and circumstances: You purchased a rental investment property in 20XX. The property was first used to produce income shortly after the property was purchased. The pre-purchase building inspection report did not confirm evidence of any asbestos damage. You were unaware that the property contained damaged asbestos until a builder inspected a sinking stump and advised there was asbestos sheeting that had been damaged. You were required to remove the asbestos sheeting which was damaged and releasing fibres that could be potentially harmful to tenants. After the removal of the damaged asbestos sheeting, rework was required to rectify the building back to its original state. This environmental protection work was completed between Month 1 20XX and Month 2 20XX. The cost to remove the asbestos and dispose of it in accordance with work cover was $XX. The cost to rectify the property was $XX ($XX for labour and $XX for materials). You have not engaged in proceedings for compensation from the building inspector.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subsection 40-755 (1) | Income Tax Assessment Act 1997 section 25-10