Private ruling: Rental property deductions - repairs and capital improvement
Date of advice: 25 February 2021
Published: April 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim an immediate deduction for all the work completed on the property, apart from the additional items added to the property? | A1: Yes. These expenses meet the requirements in Taxation Ruling TR 97/23 and are deductible as repair expenditure. Further information about repairs can be found by searching QC 23635 on ato.gov.au. | Q2: Can you claim a deduction for capital works for the additional items added to the property at a rate of 2.5% in relation to the property? | A2: Yes. These additional items are capital improvements to your property. Your capital works expenses satisfy the requirements under paragraph 43-25(2)(b) of the Income Tax Assessment Act 1997 and are deductible as the capital works are used to produce assessable income. Further information about capital works can be found by searching QC 23636 on ato.gov.au.

Relevant facts and circumstances: You purchased a property in 20XX as the sole owner. From acquisition the property has always been a rental property, producing income. At the time you purchased the property there was minor damage to a small part of the property. Since you purchased the property there has been further deterioration over the years. You undertook works to rectify the damage. At the same time additional items were added to the structure of the property. The cost of the works was not covered by insurance.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 43-10 | Income Tax Assessment Act 1997 section 43-25