Private ruling: Rental expenses - repairs and maintenance
Date of advice: 21 July 2022
Published: October 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the expenses you incurred in Table 1 deductible as repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) or as maintenance under section 8-1 of the ITAA 1997? | A1: Yes. Your expenses meet the requirements in Taxation Ruling TR 97/23 Income tax: deductions for repairs therefore, you are entitled to a deduction for your share of the cost. Further information about repairs and maintenance can be found by searching 'QC 23635' on ato.gov.au. | Q2: Are the expenses you incurred in Table 2 deductible as a capital works deduction under Division 43 of the ITAA 1997? | A2: Yes. The items listed in Table 2 are considered to form part of the fabric of the building and are considered capital works. You are entitled to a capital works deduction for your share of the cost of these items under Division 43 of the ITAA 1997 over 40 years at the rate of 2.5% per annum while the property is rented or available for rent. Further information about claiming deduction for capital works can be found by searching 'QC 23635' on ato.gov.au | Q3: Are the expenses you incurred in replacing the ceiling fan deductible as an immediate deduction under section 40-25 of the ITAA 1997? | A3: Yes. You satisfy the criteria to claim an immediate deduction for a non-business depreciating asset costing $300 or less and are entitled to a deduction for your share of the cost. Further information about expenses you can claim as an immediate deduction for can be found by searching 'QC 23635' on ato.gov.au

Relevant facts and circumstances: You own a 50% interest in an investment property with your spouse. The property is used solely for income producing purposes and has been either available for rent or rented out for many years with income earned reported in your individual tax returns. The building inspection report at the time of purchase described the property as 'average condition' compared to similar buildings of approximately the same age. The building inspection report identified the roof sheeting used in the construction of the roof as fibre cement roof sheeting, and that this product contains asbestos. The roof showed evidence of having been repaired in the past and requires ongoing maintenance. The roof was otherwise functional for purpose. A tenant reported that the roof was leaking and they were experiencing disrupted function of the ceiling electrics (fixed lights and fans), as well as the appearance of mould and moisture on the ceiling and that they were concerned for their health and safety. There had been several extreme weather events in the region over a couple of years prior to the reported issues by the tenant. You engaged the services of a contractor to investigate and were advised that they had found traces of asbestos in both the roof and ceiling sheeting. They recommended that the roof and the room which had sustained more significant set-in mould/water damage to the asbestos fibro ceiling would require full removal and replacement to rectify. The remainder of the water damaged ceiling arears could be patched/stain blocked and treated for mould and repainted. The electrical contractor advised that as a result of the water build up in the ceiling cavity, all fixtures would need replacement and repair of some wiring for safety reasons. The roofing contractor also identified deterioration in parts of the original gutters, downpipes and fascia and recommended they also be replaced at the same time as the roof replacement During the works there was only one day that the property was unavailable, as the contactor isolated the affected area in line with asbestos removal processes. The asbestos products have been replaced with a similar non-pollutant material (Colorbond roof sheeting and plasterboard) which is not superior in quality to the one that was removed and the replacement of the roof and ceiling will restore the affected areas to their efficiency of function, and not improve the areas beyond their previous state. Neither you nor your spouse have received any insurance proceeds in relation to works conducted at the property. You have incurred expenses for the following works: Table 1 Works conducted for the replacement of the damaged asbestos roof. Removal of deteriorated gutters, fascia & downpipes and replacement with its modern equivalent (colorbond products and 90mm PVC downpipe) plus supply of certification certificate. ( Excluding the supply and install of 60mm insulation blanket) Works conducted to remove and dispose of the asbestos roof and water damaged part of the ceiling. Works conducted by an electrician to investigate and repair break in old join. Works conducted by a plaster to replace the water damaged section of the ceiling. Works conducted to paint the new section of ceiling, treat mould on ceilings and re-paint mould treated areas. Table 2 Works conducted for the supply and install of 60mm insulation blanket. Works conducted for the installation of LED Downlights, and cable works. (Excluding the cost for the supply and installation of a Ceiling fan plus apportioned labour costs to disconnect old fan and install new fan) Works conducted for the installation of LED down lights.

Relevant legislative provisions: Income Tax Assessment Act section 8-1 | Income Tax Assessment Act section 25-10 | Income Tax Assessment Act Division 40 | Income Tax Assessment Act Division 43