Private ruling: Rental deductions
Date of advice: 12 March 2026
Published: 4 May 2026
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Is the bank interest you incurred in connection with your rental property during the period work was undertaken at the property deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. In your case, the renovations do not amount to substantial renovations so a deduction is not prevented by section 26-102 of the ITAA 1997. The interest on the loan is deductible under section 8-1 in line with Taxation Ruling TR 2004/4 Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities , because it was incurred with the sole purpose of producing rental income. | Q2: Are the holding costs you incurred in connection with your rental property during the period work was undertaken at the property deductible under section 8-1 of the ITAA 1997? | A2: Yes. In your case, the holding costs are deductible under section 8-1 of the ITAA 1997 for the same reasons outlined in question 1. | Q3: Are the expenses you incurred to remedy the internal water pipe at your rental property deductible under section 25-10 of the ITAA 1997? | A3: Yes. You are entitled to a deduction under section 25-10 for the repairs to the burst pipe as it is not considered an initial repair.

Relevant facts and circumstances: On DD MM YYYY, you received a pre-purchase property and pest report for the dwelling located the property. The report did not indicate any evidence of moisture or dampness at the property. The report also stated, the presence of dampness is not always consistent as the prevailing and recent weather conditions at the time an inspection is carried out may affect the detection of damp problems. On DD MM YYYY, you jointly purchased the property. For a month, you advertised the property for rent. On DD MM YYYY, you took the property off the market. The renovations completed at the property did not involve removing or replacing all, or substantially all, of the building. The structural integrity of the building remained intact. On DD MM YYYY, you identified moisture and dampness on the wall surface. You contacted a plumber who informed you a pipe had burst at the property. You fixed the section of the pipe with the same material to its previous functional state. You are not aware what caused the pipe to burst. You did not make an insurance claim for the pipe works. Prior to DD MM YYYY, the property was vacant until it was rented. There was no private use or private purpose in holding the property. On DD MM YYYY, you relisted the property for rent and leased the property soon after. For the ruling period, you incurred bank interest and holding costs associated with the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-10 | Income Tax Assessment Act 1997 section 26-102