Private ruling: Deduction for roof replacement
Published: December 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: I July 2013

Ruling: Q1: Are you entitled to a deduction for the costs in replacing the asbestos roof of your rental property? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 40-755

Reasons for decision: Summary: In your situation, the expenses incurred in the removal of the roof are of a capital nature and are therefore not deductible under the provisions of section 8-1 or section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997). However section 40-755 of the ITAA 1997 allows a deduction for expenditure incurred for the sole or dominant purpose of carrying on eligible environmental protection activities. An environmental protection activity is defined in subsection 40-755(2) of the ITAA 1997 as an activity carried on in preventing, fighting or remedying pollution, or treating, cleaning up, removing or storing waste. A deduction is not allowable for the construction of a building, structure or structural improvement or for an extension, alteration or improvement to a building. Taxation Ruling TR 97/23 in paragraph 27 and 28 identifies the removal of asbestos material as presenting a health risk and is an allowable environmental protection expenditure. In your case, the roof on your commercial premises is made of asbestos and presents a pollution risk. You are now replacing the existing roof because of the ongoing risk that it presents to your tenants. The work that you are planning to do is intended to prevent pollution and is therefore an eligible environmental protection activity. As a result, you are entitled to a deduction under section 40-755 of the ITAA 1997 for the expense incurred in removing and replacing the asbestos roof on your commercial property.

Relevant facts: You are the owner of a commercial property that you lease to tenants. | The roof of the building consists of 'super 6' sheeting which contains asbestos material. | In 20XX some asbestos material fell from the roof into the premises. The premise was cleared of the material and all areas that contained the exposed asbestos material were sealed with paint. | A clearance inspection certificate was obtained allowing the building to be re-occupied by the tenants. | You have now decided to replace the asbestos roof with a zincalume roof because you wish to remove any health risk to the tenants. You are concerned about contamination from friable asbestos that may be released from the asbestos roof. | You consider that you are replacing the existing roof with a new roof without there being an extension, alteration or improvement to the building.