Private ruling: Rental property expenses
Date of advice: 27 April 2016
Published: June 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Are you entitled to a deduction for repainting your dwelling after it had ceased to be a rental property? | Yes.

Relevant facts and circumstances: You purchased your house jointly with your spouse in 200X as your sole residence. In month 20XX you took up a fixed term position overseas. Your property was rented out. You returned to Australia and again took up residence in your house. The house was let. It was let for almost the whole period except for a few weeks between tenancies. At the time you first let the house it was in excellent condition and had been painted (interior and exterior) a few years prior to this. On your return home, after several years away, there was considerable wear and tear to the property. You began repairs to the house including painting the interior, installing new air conditioning, repairs to plumbing, restoring the garden, etc. As far as possible you carried out this work yourself. A major task that required a contractor was for the painting of the exterior of the house. Due to the considerable expense, and because of priorities in restoring other areas, you could only complete the exterior painting in the year of the ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-10 | Income Tax Assessment Act 1997 Division 43

Reasons for decision: Summary: Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs and maintenance to premises used for income producing purposes, to the extent that the expenditure is not capital in nature. Repairs and maintenance generally involve a replacement or renewal of a worn out or broken part, for example, replacing worn or damaged curtains, blinds or carpets between tenants. Maintenance generally involves keeping the property in a tenantable condition, for example repainting faded or damaged interior walls. Usually, the repairs and maintenance must relate directly to wear and tear or other damage that occurred as a result of your renting out the property. However, in your case the maintenance work (the repainting) occurred after the tenants had vacated the dwelling and you (together with your spouse) moved back into the dwelling. The ATO guide for rental property owners, Rental properties 2015 , has this example of repair and maintenance when a property is no longer rented out: After the last tenants moved out in September 2014, the Hitchmans discovered that the stove did not work, kitchen tiles were cracked and the toilet window was broken. They also discovered a hole in a bedroom wall that had been covered with a poster. In October 2014 the Hitchmans paid for this damage to be repaired so they could sell the property. As the tenants were no longer in the property, the Hitchmans were not using the property to produce assessable income. However, they could still claim a deduction for repairs to the property because the repairs related to the period when their tenants were living in the property and the repairs were completed before the end of the income year in which the property ceased to be used to produce income. In your case, repainting the exterior of your house is repair/maintenance as it keeps the property in a tenantable condition. Even though the tenants were no longer in the property the property had ceased to be used to produce income, the repair/maintenance related to the period when tenants were living in the property. The expense of painting the exterior of the house is considered to be deductible repair. That is, this work is not regarded as capital in nature and is regarded as normal maintenance expenditure. Therefore, a deduction is allowable under section 25-10 of the ITAA 1997.