Private ruling: Rental property asset
Published: October 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a decline in value deduction for the installation of a new heater to your rental property? | A1: No

Relevant facts and circumstances: You own a rental property and have installed new heating in the building while it was rented. The new heating device does not replace an existing heater or fireplace, and is a new installation. The new heating device is connected to a flue, and the main body of the heating device has been boxed in to joinery work in the structure.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 40-25, | Income Tax Assessment Act 1997 Subsection 40-30(1) and | Income Tax Assessment Act 1997 Section 43-10.

Reasons for decision: Detailed Reasoning - Decline in value: Section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997) allows you to deduct from your assessable income an amount equal to the decline in value of a depreciating asset to the extent that it is used to produce assessable income or installed ready for use for that purpose. A depreciating asset is an asset that has a limited effective life and can be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997). The new heating device is not a depreciating asset as it is not considered to be a separate item of plant. It is built into the structure and it forms part of the building. Therefore you cannot claim a deduction for a decline in value under section 40 of the ITAA 1997 for the fireplace.

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