Private ruling: Rental property expenses
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Questions and Answers | Can you claim a deduction for non-capital expenditure on repairs that are carried out in the financial year which a dwelling ceases to be used for the purpose of producing assessable income? | Yes

Relevant facts and circumstances: You rented a residential dwelling for several years The property was vacated by tenants late in a recent year. You needed to paint the dwelling walls You needed to replace the dwelling carpets as they are showing traffic wear throughout the house. The carpets were 25 years old You replaced curtain fixtures. You incurred the expenses bin a number of months up to a recent certain date. You have occupied the dwelling since the recent date.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 25-10 | Section 40-80

Reasons for decision: Summary: Repairs to rental property are deductible expenses under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Sub-section 25-10(1) of the ITAA 1997 states that you can deduct expenditure you incur for repairs to premises (or part of premises), or plant that you held or used solely for the purpose of producing assessable income. Taxation Ruling TR 97/23 states that ``repairs'' ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. Where a rental property is repaired after it is occupied by paying tenants and the need for the repairs can be related to the period during which the property was used for the purpose of producing assessable income during the income year in which the expenditure is incurred a deduction is allowable (Taxation Ruling IT 180). Painting According to Taxation Ruling TR 97/23 repair costs are deductible where they are incurred during the period the property is held for income producing purposes and are attributable to either: -damage that occur during the taxpayer's income use of the property; or -to defects that emerge suddenly during that time. In your case the rental property needed painting due to wear and tear whilst being leased. The expense incurred for painting would therefore be deductible as a repair under section 25-10 of the Income Tax Assessment Act 1997 . Curtains and Blinds The cost of replacing curtains and blinds is not considered a repair and therefore is not deductible under section 25-10 of the ITAA 1997. However, the curtains and blinds in your rental property are considered items of plant and can therefore be depreciated. As it is a depreciating asset, the expense has been incurred following a depreciation period which is not associated with an income producing activity. Therefore, there is no deduction available on the replacement curtains and blinds. Replacement of carpet The damage to the carpet in your rental property was caused by wear and tear, and therefore needed to be replaced. Carpet is a depreciating asset and therefore, you are not allowed to claim the cost outright. As it is a depreciating asset, the expense has been incurred during a depreciation period which is not associated with an income producing activity. Therefore, there is no deduction available on the replacement curtains and blinds. Conclusion In your case, your property was rented until late in a recent year. Your repair expense (repainting the walls) is deductible. Your depreciation expenses are not deductible as you no longer have an income to deduct the depreciation amounts against.

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