Private ruling: Rental property expenses
Date of advice: 9 September 2015
Published: September 2015
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for council rates, water rates and body corporate fees paid at the time of sale in relation to your rental property? | A1: Yes.

Relevant facts and circumstances: You owned a rental property which was a unit leased to an entity. The entity managed the unit as a serviced apartment. The terms of the lease indicated that the entity was responsible for the payment of body corporate fees and water rates. You were responsible for the payment of council rates. The entity failed to pay any body corporate fees or water rates for approximately 1 year. The entity stopped paying rent for the last X months and then declared bankruptcy when your lawyer commenced legal proceedings to have them evicted and sued for outstanding monies. You incurred expenses for outstanding body corporate fees, water rates and council rates at the time of the sale of the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Body corporate fees and water and council rates are an allowable deduction where a property is being used for income producing purposes. We accept that you incurred the body corporate fees, water rates and council rates in the course of gaining or producing assessable income. Therefore, you are entitled to a deduction under section 8-1 of the ITAA 1997 for these expenses.