Private ruling: Rental property deductions- repairs
Date of advice: 28 October 2025
Published: 15 December 2025
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Are you entitled to an immediate deduction for bathroom maintenance and repair expenses incurred relating to your rental property under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to the extent that they haven't been reimbursed? | A1: Yes. Section 25-10 of the ITAA 1997 states you can deduct expenditure you incur for repairs to premises (or part of premises) or a depreciating asset that you held or used solely for the purpose of producing assessable income. The bathroom repairs and maintenance were completed to remediate the damage and deterioration to the bathroom. The repairs did not improve or change the character of the bathroom. As the property is solely used for the purpose of producing assessable income, you can claim a deduction for the bathroom repairs under section 25-10 of the ITAA 1997. | Q2: Are you entitled to claim a capital works deduction for the addition of a structural concrete slab to your rental property under section under section 43-10 of the ITAA 1997 to the extent that it hasn't been reimbursed? | A2: Yes. Where expenditure is not immediately deductible under section 25-10 of the ITAA 1997 because of its capital nature, the expenses may be deductible under Division 43 of the ITAA 1997. Taxation Ruling (TR 97/25) Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements addresses a number of matters that are relevant in determining entitlement to, and the amount of, a deduction under Division 43 of the ITAA 1997 in respect of expenditure on the construction of assessable income producing buildings and other capital works. It also identifies certain expenses that are included in construction expenditure. Paragraph 7 of TR 97/25 outlines the three categories of capital works in respect of section 43-20 of the ITAA 1997 as: • Buildings or extensions, alterations, or improvements to buildings • Structural improvements or extensions, alterations, or improvements to structural improvements; and • Environment protection earthworks. The addition of the concrete slab is a structural improvement to the property. Under Division 43 of the ITAA 1997, you are entitled to a capital works deduction for 2.5% of the cost of the installation in your rental property over 40 years, from the date construction is completed, and while the property is rented or available to rent.

Relevant facts and circumstances: In 20YY, you purchased the property located at the property. You were not aware of any major defects at the time of purchasing the property. No building report was attained at the time of purchasing the property. The property has been consistently rented since it was acquired. The property has been managed by a real estate agency. In 20YY you became aware of water damage in the bathroom and proceeded to install vinyl flooring in hope of protecting the floor from further damage. On DD MM 20YY, you were invoiced by Company A for the following: • Cut out large section of rotted and collapsed flooring in bathroom. • Supply and install new temporary flooring section. • Supply and install timber batons to temporarily re-enforce other existing sections of swelling flooring. On DD MM 20YY, you were invoiced by Company A for the following: • Disconnect and remove toilet bowl as required to facilitate repairs. Store on site and re-install once works have been completed. • Disconnect all tapware and waste to vanity unit as required to facilitate repairs. Store onsite and e-install once works have been completed. • Remove and discard timber skirting to bathroom surround. • Cut out water damaged flooring to entire laundry. • Supply timber and install new fixing points in bearers and joists for new flooring. • Supply and install new chipboard flooring in bathroom up to bath hob and built in robe. • Supply and install tile underlay onto new chipboard flooring. • Supply and install urethane silicone seal to all internal corners read for waterproofing. • Supply and install waterproof membrane x2 coat ready for tiling. • Supply labour, glue and grout to lay tiles on floor. • Supply 33mm x 300 mm ceramic tiles rom standard builders' range. • Supply and install timber skirting to the bathroom surround. • Prepare and paint timber skirting to best match existing colour. • Remove all rubbish and associated debris. You continued to lease the property. In 20YY, you discovered severe rotting of the floor in the bathroom. You realised that the property had deteriorated to a point where action was required. The damages called for urgent repairs as the property was no longer habitable. You terminated the lease of the tenant at the time as the floor was in danger of collapse and because the bathroom and toilet weren't functioning. No slab existed in this part of the house. On DD MM 20YY, you were invoice by Company B for the following: • Attend site and undertake safety protocol including a site inspection and fill out SWMS for all required works. • Set up safety equipment for works where required. • Conduct drain cleaning to the storm water drain pit in the back yard of 76C tracking toward the rear easement. • Confirm drain condition post drain cleaning with CCTV. • Remove all associated rubbish and debris from site. On DD MM 20YY, Company B provided a Leak Detection Report. On DD MM 20YY, you were invoice by Company B to conduct dye testing to the courtyard and courtyard storm water pit to determine cause of water ingress under the bathroom. On DD MM 20YY, you were invoiced by Company C for the following: • Excavated down to existing stormwater • Diverted 90 mm pipe around concrete post • Connected to inlet and outlet pipes • Backfilled with existing soil • Cleaned and tidied work area • CCTV drain for conditions of pipe • Located issues on boundary • CCTV sent to Council to determine owners or councils' issue to repair stormwater issue On DD MM 20YY, you were invoiced by Company C for the following: • Attend property to drain and remove hot water service and alter shower drain • Drain and remove hot water service • Supply and install new 100mm shower drain with puddle flange for tiler On DD MM 20YY, you were invoiced by Company D for concrete placement to the bathroom floor tied into the slab. On DD MM 20YY, you were invoiced by Company E for the following services: • Removed the toilet, vanity and laundry trough • Cut out and removed skirting and existing floor • Braced floor joist and bearers • Installed new timber flooring, tile underlay, urethane silicone seal to inner corners, two coats of waterproof. membrane, tiles and grout to floor, skirting and timber quad, toilet, vanity and laundry trough • Prepared and painted skirting and quads The property bathroom and toilet were restored to their original or similar condition and function. The concrete floor was chosen to avoid future water damage to the bathroom floor in case of future blockages to the stormwater drain. The works made good the damage caused by the water. You made a claim against your insurance policy for damage to the property. The policy did not provide cover damage caused by gradual deterioration, which is specifically excluded under the policy. On DD MM 20YY, your insurer provided you with a response. The offered an additional settlement amount. Once the repairs were carried out the property was leased again.

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