Private ruling: Income tax: Deductions - repairs
Date of advice: 11 November 2025
Published: 5 January 2026
Ruling period: Income tax year ending 30 June 20XX | Income tax year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are specific expenses incurred during the period April 20XX to June 20XX that related to work carried out after the tenant left the rental property classified as repairs and deductible under section 25-10 or section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the year ended 30 June 20XX? | A1: Yes. | Q2: Are specific expenses incurred during the period July 20XX to November 20XX that related to work carried out after the tenant left the rental property classified as repairs and deductible under section 25-10 of the ITAA 1997 or section 8-1 of the ITAA 1997 for the year ended 30 June 20XX, even though no rental income was derived in this period? | A2: No

Relevant facts and circumstances: 1. You are a husband and wife who purchased the Property in February 20XX. 2. You resided in Country A at the time of purchase. 3. The Property was rented from March 20XX until March 20XX. 4. During this time, you dealt directly with the tenant. 5. When the tenant left the Property, you found that the Property had considerable damage. You have provided photographic evidence. 6. Significant work was undertaken to repair the Property. Specific works were undertaken that are not included in this application. 7. The Property was not available for rent from the start of the repairs. 8. The work undertaken included: • replacement and upgrade of electrical switchboard as the old switchboard was faulty • replacement of wooden floorboards • replacement of carpet • fix and reclad walls and ceilings • general labour expenses • repair and replacement of damaged eaves, gutters and downpipes • restoration of leaky roof and re-pointing • replacement of faulty solar system • replacement of damaged front door • replacement of damaged window frames • replacement of tiles • replacement of damaged air conditioning 9. In January 20XX, you moved to Country B from Country A. You moved into the Property and it is currently your main residence.

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

Reasons for decision: Summary: The works undertaken to the extent they are not the replacement of a depreciable asset are deductible under section 25-10 of the ITAA 1997 for the period from April XXXX to June XXXX. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the ITAA 1997 states that you can deduct any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income. You cannot deduct amounts under section 8-1 of the ITAA 1997 to the extent that the loss or outgoing is capital or private in nature or is incurred in relation to gaining or producing exempt income or non-assessable non-exempt income. Section 8-10 of the ITAA 1997 prevents double deductions by specifying if two or more provisions allow a deduction in respect of the same amount, you can only deduct an amount under the provision that is the most appropriate. Taxation Ruling TR 97/23 Income tax: deductions for repairs (TR 97/23) at paragraph 7 provides the following: Which provision is the most appropriate is an objective question. In our view, if both sections 25-10 and 8-1 allow you to deduct the same amount, section 25-10, being the provision that deals specifically with repair expenditure, is the most appropriate provision . Subsection 25-10(1) of the ITAA 1997 states that 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. TR 97/23 explains the principles and the circumstances in which expenditure incurred for repairs is an allowable deduction. Relevantly, TR 97/23 explains as follows: 13. The word 'repairs' has its ordinary meaning. It ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. 14. Work done to prevent or anticipate defects, damage or deterioration (in a mechanical or physical sense) in property is not in itself a 'repair' unless it is done in conjunction with remedying or making good defects in, damage to, or deterioration of, the property. 15. Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes (whether expected or unexpected) during the passage of time. 16. To repair property improves to some extent the condition it was in immediately before repair. A minor and incidental degree of improvement, addition or alteration may be done to property and still be a repair. If the work amounts to substantial improvement, addition or alteration, it is not a repair and is not deductible under section 25-10. Section 40-25 of the ITAA 1997 states that you can deduct an amount for the decline in value of a depreciating asset you hold to the extent that you use it for a taxable purpose, however, the amount you can deduct must be reduced by any use for a non-taxable purpose in accordance with subsection 40-25(2) of the ITAA 1997. The term 'depreciating asset' is defined in subsection 40-30(1) of the ITAA 1997 as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. | Detailed Reasoning - Application to your circumstances: In your case, the Property was acquired in February XXXX. After the tenant left the Property in March XXXX, works were undertaken to remedy the damage caused by the tenant. The following items are considered repairs as they are to a part of the Property, not the entirety and they are to remedy the defects, damage or deterioration in a mechanical and physical sense to the Property. The following works were undertaken while the Property was income producing and the costs are therefore deductible under 25-10 of the ITAA 1997: - the replacement and upgrade of electrical switchboard; - the replacement of wooden floorboards; - the replacement of carpet; - the fixing and recladding of walls and ceiling; - the general labour for works carried out; - the repair and replacement of damaged gutters and downpipes; and - the restoration and pointing of the leaky roof | Detailed Reasoning - Solar system and air conditioner: The replacement of the solar system and air conditioning are both items of depreciable plant. TR 97/23 explains that works are not a repair if: - the thing or structure is separately identifiable as a principal item of capital equipment; or - the thing or structure is a separate and distinct item of plant in itself from the thing or structure which it serves; or - the thing or structure is a 'unit of property' as that expression is used in the depreciation deduction provisions of income tax law. Section 40-25 of the ITAA 1997 states that you can deduct an amount for the decline in value of a depreciating asset that you hold to the extent that you use it for a taxable purpose, however the amount you can deduct must be reduced by any use for a non-taxable purpose in accordance with subsection 40-25 of the ITAA 1997. The term 'depreciating asset' is defined in subsection 40-30(1) of the ITAA 1997 as an asset that has a limited effective lift and can reasonably be expected to decline in value over the time it is used. The deduction is spread over the item's useful life. Therefore, the cost of the solar system and air conditioning replacements are not repairs under section 25-10 of the ITAA 1997. | Summary: As the Property had not been used in the production of assessable income in the XXXX income year (being the year in which the expenditure was incurred), both of the conditions in IT 180 have not been met. Therefore, any expenses incurred during the XXXX income year are not deductible under section 25-10 of the ITAA 1997. Further, a deduction is not available under section 8-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Taxation Ruling IT 180 Repairs to property carried out after the cessation of income production , relevantly states in respect of the predecessor provision to section 25-10 of the ITAA 1997 (the former section 53 of the Income Tax Assessment Act 1936 (ITAA 1936)): 'The question falling for consideration was whether expenditure incurred by the taxpayer during the year of income for repairs to premises which has been held by her for the purpose of producing assessable income during the year of income constituted an allowable deduction for the purposes of section 53 of the Income Tax Assessment Act 1936-1948. The point taken for the Commissioner was that, as the repairs were effected and paid for after the property had ceased to be rent producing, the expenditure was not to premises 'held, occupied or used' for the purposes of producing assessable income. It was thought that the deduction was debarred by the terms of section 53(2). The view now held is that, providing the necessity for the repairs can be related to the period of time during which the premises were producing assessable income and providing, further, that the premises have produced assessable income during the year in which the expenditure was incurred, the provisions of section 53, in this regard, have been satisfied. A similar attitude has been adopted by this office in other parallel cases.' There was no intended change in meaning when the former section 53 of the ITAA 1936 was rewritten as section 25-10 of the ITAA 1997. Paragraph 4 of IT 180 further states that the cost of repairs to a property after it stops being used to produce assessable income may be deductible providing: • the necessity for the repairs can be related to a period of time during which the premises have been used to produce assessable income of the taxpayer, and • the premises have been used in the production of such assessable income of the year of income in which the expenditure was incurred. The view is still held that a deduction is not available under section 25-10 of the ITAA 1997 if the repairs are carried out in an income year after the year in which the property ceases to be used for the purpose of producing assessable income. Section 8-1 of the ITAA 1997 provides that losses or outgoings are deductible to the extent that they are incurred in: • the gaining or producing of assessable income; or • in the carrying on of a business for the purposes of gaining or producing assessable income. However, you cannot deduct a loss or outgoing under section 8-1 of the ITAA 1997 to the extent that it is a loss or outgoing of capital, or of a capital nature, is private or domestic in nature or incurred in gaining or producing non-assessable non-exempt income. A deduction is only allowable if an expense: - is actually incurred; - meets the deductibility tests; and - satisfies the substantiation rules. The decided cases on whether a loss or outgoing may be deductible in an income year following the cessation of income producing activities is confined to losses or outgoings being considered under the 2 nd positive limb of section 8-1 of the ITAA 1997 being whether the loss or outgoing was incurred in the carrying on of a business for the purposes of gaining or producing assessable income. As is explained in example 1 of Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners ), the renting of a property does not amount to the carrying on of a business. Here, the loss or outgoing concerning the repairs is tested under the first positive limb of section 8-1 of the ITAA 1997 being whether the loss or outgoing is incurred in gaining or producing assessable income. The Commissioner's long-standing position is that where repairs are incurred in an income year following the income year in which the property has ceased being used for the gaining or production of assessable income, they are not deductible under any provision of the tax law including section 8-1 of the ITAA 1997. This view is published on our website at the following link where it is said: | Detailed Reasoning - Repair and maintenance expenses | Australian Taxation Office Repairs: If you no longer rent the property, you may still be able to claim repair expenses where both: • the need for repairs related to a period when the property was income producing • the property was income producing during the income year you incurred the expenses. | Detailed Reasoning - Application to your circumstances: As the Property was not used in the production of assessable income in the XXXX income year in which the expenditure was incurred, both of the conditions in IT 180 have not been met. Therefore, any expenses incurred during the XXXX income year are not deductible under section 25-10 of the ITAA 1997. Further, a deduction is not available under section 8-1 of the ITAA 1997.