Private ruling: Rental property expenses
Published: October 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for the cost of painting your rental property? | A1: Yes.

Relevant facts and circumstances: You purchased a rental property several years ago. You have had the same tenant since purchasing the property. Paint on the exterior walls of the property was starting to peel off and the timber work was beginning to deteriorate, You have painted the exterior of the property. You undertook the work to return the property to its original condition, and avoid any further damage.

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

Reasons for decision: Summary: Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs to premises held for income producing purposes, provided the repairs are not of a capital nature. The word repair is not defined within the tax legislation and takes its ordinary meaning. Repair involves a restoration of a thing to a condition it formerly had without changing its character ( W Thomas & Co Pty Ltd v. Federal Commissioner of Taxation (1965) 115 CLR 58; (1965) 14 ATD 78; (1965) 9 AITR 710). Taxation Ruling TR 97/23 discusses the circumstances in which expenditure incurred for repairs may or may not be an allowable. 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. Work done to prevent or anticipate defects, damage or deterioration (in a mechanical or physical sense) in property is not in itself a 'repair' unless it is done in conjunction with remedying or making good defects in, damage to, or deterioration of, the property. In your case, the work is not an initial repair as the damage was not in existence when you acquired the property some years ago. The work carried out has been occasioned by ordinary wear and tear during the period of income production and has been undertaken merely to restore the efficiency of the function of the property, to rectify damage and to prevent further damage. Therefore the work that was undertaken is considered to be a repair and you are entitled to a deduction under section 25-10 of the ITAA 1997.

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