Private ruling: Rental property - deductions
Date of advice: 8 April 2025
Published: 23 June 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you deduct expenses incurred to undertake repairs to damaged and deteriorated parts of your rental property under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Section 25-10 of the ITAA 1997 permits an immediate deduction for expenditure you incur to repair premises or plant which you hold or use for the sole purpose of producing assessable income, unless the outlay is capital expenditure which is prevented from being deductible as a repair by subsection 25-10(3) of the ITAA 1997.

Relevant facts and circumstances: In MM 20XX, you purchased a commercial property. The property become income-producing shortly after purchase. The roof of the property had no issues at the time of purchase. The roof was made up of metal sheets with some perspex sheets (approximately 350 square meters). The perspex sheets are placed along certain sections of the roof to provide natural light. Over time, extensive rust corrosion developed on the metal sheets, while the perspex sheets became brittle and cracked due to UV exposure. This resulted in significant leaks across multiple locations on the roof. Additionally, the gutters and downpipes were heavily corroded, rendering them ineffective at channeling water. In MM 20XX, a significant rain event worsened the roof corrosion, leading to major leaks that required immediate attention. Consequently, the managing agent promptly arranged for a contractor to inspect the roof. In MM 20XX, a contractor inspected the roof and guttering and determined that the corrosion was extensive enough to necessitate the replacement of all roof sheeting and guttering to prevent further leaks. The work began promptly, with all metal and perspex sheets replaced using identical roofing products and maintaining the same layout as before. There were no modifications to the metal beams or the supporting structure of the roof. The guttering was also replaced with identical products and layout as previously used. In MM 20XX, the installation of the roof and gutter were completed. The total cost of the wors was $XX (inclusive of GST).

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