Private ruling: Rental property repairs - bathroom.
Date of advice: 25 September 2019
Published: November 2019
Ruling period: 1 July 2018 to 30 June 2019

Ruling: Q1: Are the expenses incurred for the rental property an immediate deduction under 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The repairs conducted were not to prevent or anticipate defects, damage or deterioration. The repairs restored the efficiency of function of the property, without changing its character and included restoration of its former appearance, form, state and condition. The repairs are allowable as an immediate deduction in the year they were incurred.

Relevant facts and circumstances: You and your spouse purchased the dwelling to derive rental income. The tenants called the real estate and advised they stepped in the bath and it collapsed due to rotting timber. The real estate inspected the damage and confirmed the poor state of the bathroom. You engaged professional advice in relation to the bathroom and they identified the following issues - · Removing bath showed water leak from shower running behind the wall and under the bath, causing rotting to occur to the timber bath frame. · The damage to the bath caused damage to the tiles surrounding the bath. · Damage to the LHS plaster wall, swelling and damage to the bathroom vanity. · Repairs could not be conducted without first removing the shower, bath and vanity. The insurance company paid half of the repair expenses. The house remained tenanted through the whole period; you provided the tenants with a hotel room whilst the repairs were conducted.

Relevant legislative provisions: Income Tax Assessment Act 1997 section25-10