Private ruling: Deductions - rental deductions
Date of advice: 19 December 2025
Published: 9 February 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim an immediate deduction for the expense incur in replacing damaged carpet under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Can you claim an amount equal to the decline in value for an income year of new carpet as depreciating assets under section 40-25 of the ITAA 1997? | A2: Yes.

Relevant facts and circumstances: You acquired a rental property. You are the single owner of the property. On XX 20XX, the property was available for rent and managed by the property manager. On XX 20XX, the property manager advised that upon an end of lease inspection, the property's carpet was damaged and needed to be replaced. The damage to the carpet was caused by the pets of the long-term tenant. The carpet was over 10 years old. On XX 20XX, you paid the full amount of replacing the damaged carpet which totalled $XXXX. You replaced the whole carpet in some areas of your property. You did not receive any reimbursement from your tenant or insurer.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-10 | Income Tax Assessment Act 1997 Division 40 | Income Tax Assessment Act 1997 section 40-25 | Income Tax Assessment Act 1997 section 40-30

Reasons for decision: Summary: Section 25 -10 of ITAA 1997 allows you to deduct expenditure you incur for repairs to premises used for income producing purpose, to the extent that the expenditure is not capital in nature. Tax Ruling TR 97/23 Income Tax: deductions for repairs provides the circumstances in which deductions for repairs are allowable.TR 97/23 defines a repair for the purposes of section 25-10 of the ITAA 1997 is a question of fact and degree in each case having regard to the appearance, form, state and condition of the particular property at the time the expenditure is incurred and to the nature and extent of the work done to the property. Paragraph 36 - 37 of the TR 97/23 distinguishes repair with renewal or reconstruction as repair is restoration of subsidiary parts of a whole and renewal or reconstruction is restoration of the entirety. | Detailed Reasoning - Application to your circumstances: In your case, replacing the whole carpet in living area, the stairs and two bedrooms are a renewal or reconstruction of the entirety of those items. Therefore, you are not entitled to deduct the expenses under section 25-10 of the ITAA 1997. | Detailed Reasoning - Question 2: Section 40-25 of the ITAA 1997 allows you to deduct an amount equal to the decline in value for an income year of a depreciating asset you hold to the extent that you use it for taxable purpose. Section 40-30 of the ITAA 1997 determines a depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Taxation Ruling TR 2022/1 Income tax: effective life of depreciating assets provides the effective life of depreciating assets. TR 2022/1 lists carpet as depreciating asset. | Detailed Reasoning - Application to your circumstances: You replaced the carpet in living area, stairs and two bedrooms at your rental property. These items are depreciating assets under section 40-30 of the ITAA 1997. Therefore, you can claim a deduction from the time they are installed and ready to use for the purpose of producing assessable income under section 40-25 of the ITAA 1997.