Private ruling: Rental property expenses
Date of advice: 10 November 2025
Published: 5 January 2026
Ruling period: DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Can you claim an immediate deduction for the body corporate special levy instalments under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for the proportion of remedial works that relates to the cost of the replacement of the damaged balustrades for your rental unit, patching work done to balcony, painting as well as scaffolding required to access balcony, and the cost of repairing existing waterproofing of your balcony? | A1: Yes. Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs to premises used for income producing purposes. However, subsection 25-10(3) of the ITAA 1997 does not allow a deduction for repairs where the expenditure is of a capital nature. The following are examples of expenses which are capital or of a capital nature: • replacement of an entire structure or unit of property (such as a complete fence or building, a stove, kitchen cupboards or refrigerator) • improvements, renovations, extensions, and alterations, and • initial repairs, for example, in remedying defects, damage or deterioration that existed at the date you acquired the property. Taxation Ruling TR 97/23 Income tax: deductions for repairs explains the principles and the circumstances in which expenditure incurred for repairs is an allowable deduction. The term 'repair' means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired and contemplates the continued existence of the property. 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. Repair costs are deductible where they are incurred during the period the property is held for income producing purposes and are attributable either to damage that occurs during your income producing use of the property or to defects that emerge suddenly during that time. Paragraph 50 of the TR 97/23 explains if the work done restores a previous function to the property, or restores the efficiency of the previous function, it does not matter that a different material is used. Even if the work done using different material enables the property to perform its function marginally more efficiently, the work may still constitute a deductible repair. In your case, the remedial work such as the replacement of the damaged balustrades for your rental unit, patching work done to balcony, painting as well as scaffolding required to access balcony, and the cost of repairing existing waterproofing of your balcony would be considered a repair. You can therefore claim an immediate deduction under section 25-10 of the ITAA 1997 for these expenses at the time when incurred.

Relevant facts and circumstances: On DD MM YY, you purchased a property located at XXXX for $XX. XX units are located at the property. You are the sole owner of the property. You resided at the property as owner-occupier from DD MM YY to DD MM YY. On DD MM YY, the property was made available for renting. The property is managed by a real estate agent. The property is rented at market rate. You entered into a formal rental agreement with the tenants. The property has not been vacant for any period. The Engineering Specification Report dated DD MM YY notes the following: • The building was inspected on DD MM YY to assess the building and units for water ingress, including condition of the external façade of the building and report on the findings. • The design intent of these remedial building works is to rectify the issues produced in the inspection report dated DD MM YY. The Engineering Scope of Works document reveals the nature of work to be completed: • Concrete spalling - remove all cracked/loose concrete and treat corroded steel reinforcement before reinstating concrete surface. • Balcony & Concrete Ledge waterproofing - remove and replace existing waterproof membrane on balconies to prevent water ingress and mould growth. • Balustrades - replace existing balcony balustrades with compliant. The Building Works Contract with the builder dated DD MM YY, confirms that the contract sum was $XX inclusive of GST. The Building Works Contract with the builder was signed on DD MM YY. On DD MM YY, the Certificate of Practical Completion was issued. The building rectification works were funded via a special levy required by the body corporate. You paid XX% share of the special levy expenses. You paid via instalments. Your special levy payments totalled $XX.

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