Private ruling: Rental - other deductions
Date of advice: 9 January 2026
Published: 2 March 2026
Date scheme commenced: XX June 20XX

Ruling: Q1: Are you entitled to an XX% deduction for the portion of the Care and RentalSupport (CARS) prepaid expense relating to Custodian House and Garden Care Services? | A1: Yes. | Q2: Are you entitled to an XX% deduction for the portion of the CARS prepaid expense relating to the Rental Income Protection Guarantee? | A2: Yes. | Q3: Are you entitled to an XX% deduction for the upfront expense relating to a Quantity Surveyor's Report in the year it was incurred? | A3: Yes. This private ruling applies for the following period: Year ended 30 June 20XX The scheme commenced on: XX June 20XX

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect, and you cannot rely on it. Find out more about when you can rely on your private ruling at ato.gov.au/relyonprivateruling. On XX June 20XX, you and your spouse purchased an investment property (the property) as tenants in common holding XX% and XX% ownership interest respectively. This was a land and house package with settlement completed on XX June 20XX. At the time of settlement, construction of the dwelling had not yet commenced. The construction of the house was completed in the 20XX financial year. The Property was made available for rent as soon as practical after the Handover Date, being the date on which the house was handed over to the owner by the builder. On XX XXX 20XX, you entered into an agreement with a real estate agency by executing a Form 6 - Appointment and Reappointment of a Property Agent, Auctioneer or Property Developer, as prescribed under the State Government Legislation. On XX June 20XX, being your settlement date, you entered a Care and Rental Support (CARS) Agreement with the Company. As part of this agreement, you paid a CARS fee in exchange for the services that the Company will provide under the terms of the agreement. The services covered by the CARS fee is outlined in the CARS Agreement. In summary: 1 . Custodian house and garden care service The Company agrees to provide or arrange for the following services for twelve months from the Handover Date: a) A minimum of 15 visits to the House per year b) Mow, edge, weed, prune, trim and clean up the front yard as required c) Mow, edge and weed the back yard from handover to the date of commencement of the lease over the Property (following which the commencement of a lease over the Property, the back yard is the responsibility of the owner or tenant) d) Fertilise the front yard annually e) Provide photographic updates on the house two times per year f) Liaise with property managers to assist in satisfying tenant/owner garden care queries 2. Rental income protection guarantee The Company agrees to guarantee 75% of the market rental (calculated daily) for any period during the term of this Rental Income Protection Guarantee that the house and land are vacant if certain conditions have been satisfied. Such as you and your spouse entered and maintained a Landlord's Protection Policy of insurance in respect of the house and land and maintained the insurance cover during the whole of the term of this Rental Income Protection Guarantee The term of this Rental Income Protection Guarantee will commence to run where the land purchased under the Land Contract does not already have a house built on it, thirty-two (32) weeks after commencement of construction of the house on the land. The term of this Rental Income Protection shall be a period of fifty-two (52) weeks from the relevant Commencement Date 3. Custodian care programme (quantity surveyor report) The Company agrees to provide or arrange for a Quantity Surveyor's Report on the depreciable assets and capital works of the House and Land to be ascertained through inspections with the Builder at the laying of the slab, lockup and final stages of construction. The CARS Agreement says the Company's obligation to perform the services will commence on the Handover Date or the date on which the Company considered that the Property is ready to be prepared for leasing to a tenant. Please be aware of the following additional information about the services Care and Rental Support (CARS) Agreement with the Company - as part of the application for private ruling as follows: • Custodian House and Garden Care Service - although paid for before the home was ready for rental, the service period was provided for 12 months from the time the home was ready to be tenanted. • Rental Income Protection Guarantee - an insurance for loss of income or inability to rent the property out. Although paid for before the home was ready for rental, the service period was provided for 12 months starting from the time the home was ready to be rented. • Quantity Surveyor's Report - a depreciation report on the property that would be received by you following the completion of construction of the property but paid for upfront.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8.1 | Income Tax Assessment Act 1997 section 25-5 | Income Tax Assessment Act 1936 section 82KZM

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) permits a deduction for losses and outgoings to the extent they are incurred in gaining or producing assessable income, unless the expenditure is capital, private or domestic in nature, or relates to the derivation of exempt income. Where an amount is otherwise deductible under section 8-1 but is prepaid, the operation of section 82KZM of the Income Tax Assessment Act 1936 (ITAA 1936) must also be considered. A prepaid expense is an amount incurred under an agreement for services to be provided, in whole or in part, in a subsequent income year. Section 82KZM allows an immediate deduction for prepaid expenditure where all the following conditions are met: • the expenditure is otherwise deductible under section 8-1 of the ITAA 1997 • you are an individual, and the expenditure was not incurred while carrying on a business • the expenditure is not "excluded expenditure", and • the eligible service period is 12 months or less and ends no later than the last day of the income year following the income year in which the payment was incurred. Where the eligible service period is 12 months or less but extends beyond the last day of the income year following the year of incurrence, the deduction must be apportioned over the eligible service period. The amount deductible for each income year is calculated using the following formula: Expenditure × number of days of eligible service period in the income year ÷ total number of days of eligible service period | Detailed Reasoning - 1. Custodian house and garden care service: General gardening and lawn-mowing expenses are ordinarily deductible under section 8-1 of the ITAA 1997, as they relate directly to the maintenance and preservation of an income-producing property. Accordingly, the Custodian House and Garden Care Service fee would, in principle, be deductible under section 8-1. However, because this amount was prepaid under the CARS agreement, the timing rules in section 82KZM of the ITAA 1936 must be considered. In determining the appropriate timing of the deduction, the following factors are relevant: • You are an individual who is not carrying on a business of renting properties. • The eligible service period under the agreement is 12 months, commencing on the Handover Date, or on the date the Company determines that the property is ready to be prepared for leasing. This commencement date appears to fall within the 20XX-XX income year. • On this basis, the eligible service period will end no later than 30 June 20XX, being the final day of the income year following the income year in which the expenditure was incurred. Having regard to these factors, you are entitled to an immediate deduction for the Custodian House and Garden Care Service fee in the 20XX-XX income year, consistent with the operation of section 82KZM. If, however, the eligible service period was to extend beyond 30 June 20XX, the prepaid expenditure would instead need to be apportioned between the 20XX-XX and 20XX-XX income years, using the apportionment formula outlined above. | Detailed Reasoning - 2. Rental income protection guarantee: Premiums paid under a policy that provides protection against the loss of rental income due to vacancy are incurred for the purpose of safeguarding the taxpayer's investment income. There is a clear and sufficient nexus between obtaining insurance to mitigate potential rental income loss and the derivation of assessable rental income. Accordingly, the expenditure is deductible under section 8-1. As the Rental Income Protection Guarantee premium was prepaid under the CARS agreement, the timing provisions in section 82KZM must also be considered. The relevant factors are as follows: • You are an individual who is not carrying on a rental property business. • The eligible service period is 12 months (52 weeks), commencing 32 weeks after construction of the property commenced. While the exact construction start date is not known, the CARS agreement additionally provides that the eligible service period begins when the property is ready to be prepared for lease. As the property was listed for rent in February 20XX, it is reasonable to conclude that the eligible service period commenced during the 20XX-XX income year. • On this basis, the eligible service period would conclude on or before 30 June 20XX, being the final day of the income year following the year in which the expenditure was incurred. Given these circumstances, you are entitled to an immediate deduction for the Rental Income Protection Guarantee premium in the 20XX-XX income year, as required under section 82KZM. If, however, the eligible service period was to extend beyond 30 June 20XX, the expenditure would need to be apportioned between the 20XX-XX and 20XX-XX income years using the apportionment methodology previously described. Further guidance on prepaid rental property expenses can be found by entering QC 101522 into the search function on ato.gov.au. | Detailed Reasoning - 3.Custodian care programme (quantity surveyor's report): Section 25-5 of the ITAA 1997 allows a deduction for expenditure incurred in managing your tax affairs. This includes costs associated with creating, preparing or maintaining records necessary for determining your income tax position. The Quantity Surveyor's Report is obtained for the purpose of establishing and maintaining records relevant to your tax obligations, including depreciation schedules and capital allowances. The expenditure therefore falls squarely within the scope of expenses incurred in managing tax affairs. Accordingly, you are entitled to a deduction for the upfront cost of obtaining the quantity surveyor's report in the 20XX-XX income year, pursuant to section 25-5.