Private ruling: Purchase of tools
Published: September 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Q1: Can you claim a deduction for the decline in value of tools purchased for performing repairs and maintenance work on your rental properties? | A1: Yes


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

Reasons for decision: Summary: Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) contains provisions which allow you to claim a deduction for the decline in value of depreciating assets. Section 40-25 of the ITAA 1997 states that you can deduct an amount for the decline in value of a depreciating asset you hold to the extent that you use it for a taxable purpose. Taxable purpose is defined in subsection 40-25(7) of the ITAA 1997 to mean for the purposes of producing assessable income. In your case you have purchased tools to carry out repairs and maintenance work on your rental properties. It is accepted that you use the tools for income producing purposes. Where the tools, or sets of tools, are used for income producing purposes and cost more than $300, a deduction representing the decline in value of the tools is allowed under Division 40 of the ITAA 1997. An immediate deduction is allowable on tools costing $300 or less.

Relevant facts: Since the 2010-11 financial year you have undertaken extensive repairs and maintenance to your rental properties. | In order to undertake this work you have had to purchase a number of tools which have been solely used for doing repair and maintenance work. | Some of the tools purchased include some power tools and various other tools for plumbing and general repairs. | To date you have spent about $xx on tools.