Private ruling: Deductions for rental property expenses
Date of advice: 29 July 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Are you entitled to claim the expenses associated with your rental property while it was not rented out but available for rent? | Yes.

Relevant facts and circumstances: You were working away from your home for a period of time. You were able to rent the property for some of the period you were away. You were not able to get a tenant for part of the period you were away. Your property was available for rent for the entire period you were away. You were not able to list the property with a real-estate agent as the period was too short. You advertised the property for rent amongst your colleagues. You also advertised on a notice board at your workplace. A notice was put in the window of your rental property advertising it for rent. You wish to claim a portion of the following expenses as a deduction: • Mortgage interest • Strata fees • Contents insurance • Rates

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1.

Reasons for decision: Summary: According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature. Expenses incurred relating to a rental property are deductible under section 8-1 of the ITAA 1997, if the property is rented or available for rent in the income year in which you claim the deduction. A deduction is allowable in circumstances where a property is not able to be rented out for a variety of reasons, but has been available for rent and active bona fide attempts have been made to secure a tenant. Taxation Ruling 97/23 looks at the deductibility of repairs and in particular paragraph 73 of TR 97/23 which relates to Expenditure for repairs after property is held, etc., for income purposes but before income is actually derived. Paragraph 73 specifically states that: A deduction is allowable under section 25-10 for repair expenditure incurred in a year of income after property is first held, etc., for income purposes but before income is actually derived from the property, provided the repairs are not initial repairs. For example, a rental property may be vacant but be advertised as being available for rental. Before a tenant occupies the property, storm damage or an accidental breakage occurs. Expenditure incurred to repair the damage or breakage is deductible under section 25-10 because the property is held, etc., for income purposes. The above paragraph relates to repairs carried out on a rental property prior to it earning income. This paragraph and ruling has no application to your circumstances as you are not seeking a deduction for repairs carried out on your property prior to earning income. However you are able to claim a deduction for the expenses relating to the property under section 8-1 of the ITAA 1997 for the period it was vacant and was available and advertised for rent.