Private ruling: Deductions - rental property repairs - body corporate special levies
Date of advice: 6 August 2025
Published: 13 October 2025
Ruling period: Year ended DD MM 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Are you entitled to claim the full amount of the special strata levies as a deductible expense? | A1: Yes. Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs made to premises or depreciating assets used solely for producing assessable income. However, subsection 25-10(3) of the ITAA 1997 denies a deduction for repairs where the expenditure is of a capital nature. An improvement to a property would be capital in nature and is therefore not deductible. Taxation Ruling TR 97/23 Income tax: deductions for repairs (TR 97/23) provides guidelines on the deductibility of repairs. Generally, a 'repair' involves a restoration of a thing to a condition and efficiency it formerly had. Works can be fairly described as repairs if they are done to make good damage or deterioration of property that has occurred by ordinary wear and tear, by accidental or deliberate damage, or by the operation of natural causes during the passage of time. Paragraph 49 of TR 97/23 states: Whether the use of a more modern material to replace the original material qualifies as a repair is a question determined on the facts of each case. It is restoration of a thing's efficiency of function (without changing its character) rather than exact repetition of form or material that is significant. Where the body corporate has levied a special contribution to the general-purpose sinking fund to finance certain works, the character of an expense follows the purpose for which the expense was incurred. It follows that if the levy is used to fund expenditure which would be otherwise deductible then the contribution made towards the levy is also deductible. In your case, the special purpose levy was used by the body corporate to undertake remedial works due to the excessive water penetration due to the existing waterproofing membrane becoming brittle and deteriorated. Therefore, repairs were required including the application of a new PVC-P waterproof membrane system to courtyards and planter boxes, external painting, the installation of a new suspended paver system and concrete spalling. You can claim an immediate deduction under section 25-10 of the ITAA 1997 for these expenses at the time when incurred. The timing will be in the income year, when the remedial works were actually completed and paid for by funds held in the special levy.

Relevant facts and circumstances: The property is located at XXXXX (the property). You purchased the property in 20YY. The property was your principal place of residence until 20YY. The property was then tenanted. You provided a copy of the levy notice dated DD MM 20YY for an amount of $X You provided a copy of an Engineering report which outlined the work to be undertaken and their recommendation on how to resolve the issues.

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