Private ruling: Rental expenses - repairs vs improvements
Date of advice: 5 May 2022
Published: July 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to an immediate deduction for the cost of roof rectification works you have incurred? | A1: Yes.The roof rectification works are not considered to be a renewal or reconstruction of an entirety, it is not an initial repair, or an improvement and the expense is in respect to an income producing asset. The expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible under section 25-10 of the Income Tax Assessment Act 1997 . Further information about repairs can be found by searching 'QC 23635' on ato.gov.au

Relevant facts and circumstances: You own the property as joint tenants. Your property is located within a complex and is under a strata title. You have continuously rented out the property since purchase and it has not been vacant for any period in the ruling year. The property is rented out at market rates and is managed by a property manager. The roof was in good condition at the time the complex was originally built. The complex has a flat concrete roof with a membrane. Apartments on the top floor experienced leaking from the roof and this was investigated by a structural engineer. The structural engineer found numerous water leaks and concrete spalling across the roof due to the failure of the waterproof membrane on the roof. The long term solution recommended by the structural engineers is to re-waterproof the roof and rectify concrete spalling issues. A remediation builder was contracted. The builder carried out the required works required to rectify the roof defects. Practical completion of the roof remediation was achieved. You incurred a special levy called 'roof remediation'. You paid a share of the levies to your body corporate for the relevant income year. The property continues to be rented out.

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