Private ruling: Rental property - deductions - tree removal
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 expenses incurred to remove trees from your rental property? | A1: Yes.

Relevant facts and circumstances: You have used a property to produce rental income for a number of years. A tree on the property died and started to pose a risk to tenants due to falling branches. Another tree on the property was causing damage to the property. You incurred expenses to have the trees removed. The tree that died was healthy when you made the property available for rent, and the other tree was not causing damage. You have not replaced the trees.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-10

Reasons for decision: Summary: Expenditure associated with the removal of trees on a rental property normally falls for consideration as a repair. You can deduct expenditure you incur for repairs to premises used for income producing purposes providing the expenditure is not capital in nature (section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). However, if tree felling is not strictly a repair it falls for consideration under section 8-1 of the ITAA 1997. You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is private or capital in nature. General garden maintenance is an allowable deduction where, for example, you pay someone to mow lawns, maintain garden beds or prune trees. However, landscaping is considered to be an improvement and therefore not an allowable deduction. In your case, you had a dead tree removed from your rental property due to concerns about falling branches, and another tree removed as it was causing damage to the property. The removal of the trees might appear to be improvements (and therefore capital expenses and not deductible) by solving the problem of falling branches and damage to the property. However, as the problems arose during the income producing period, the expenditure incurred in felling and removing the trees does no more than remove problems so as to put you in the same position you were in before the problem of falling branches and damage to the property. It is considered that the expenditure incurred to fell and remove the trees does not achieve any improvement, and as such, you are entitled to a deduction for the cost of felling and removing the trees under section 8-1 of the ITAA 1997.