Private ruling: Rental property expenses
Date of advice: 25 January 2023
Published: 13 March 2023
Ruling period: Year ended 30 June 2022
Date scheme commenced: 1 July 2021

Ruling: Q1: Will the holding expenses of your rental property such as interest, rates and taxes, be tax deductible during a period where the property is vacant and repairs are required before the property is again habitable? | A1: Yes. Based on the information provided to the Commissioner, the expenses relating to your rental property are deductable under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) while the property is vacant and being repair.

Relevant facts and circumstances: You and your spouse own a rental property. The property has been rented out since it was purchased. The tenant moved out of the apartment in XXXX 2021. The property has been vacant since the tenant moved out. The property had become unfit for habitation due to water ingress and mould. The owners corporation are taking action to force the builder to make good on the building defects causing the water ingress. You and your spouse intend to put the property back on the rental market once it has been made habitable. You and your spouse are incurring expenses such as loan interest, rates and taxes.

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