Private ruling: Rental property deductions - repairs
Date of advice: 27 August 2020
Published: October 2020
Ruling period: Year ended 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the portion of the special levy for partial underpinning and other works, excluding sandblasting and hot-dip galvanising of handrails, be an allowable deduction in the year incurred? | A1: Yes. The portion of the special levy incurred in relation to the partial underpinning and other works to your rental property, excluding sandblasting and hot-dip galvanising of handrails, will restore the property to its original condition. The proposed works do not alter the character or functionality of the property. Accordingly, you are eligible to claim a deduction for the repairs in the year you incur the special levy under section 25-10 of the Income Tax Assessment Act 1997.

Relevant facts and circumstances: You have owned a rental property for many years. The property is a unit in a complex. A building and pest inspection was undertaken due to the sale of another unit in the complex. The inspection revealed structural issues with the roof and part of the slab and rectification works are required. The proposed underpinning works are only for part of the foundation of the building. An Extraordinary General Meeting was held. A builder's quote was approved and a special levy for each unit was decided. All unit owners paid the special levy and the Body Corporate is in the process of signing a construction contract with the Builder. Included in the builder's quote is an item for ground level handrail works including sandblasting, hot dip galvanising and painting. You consider the sandblasting and hot dip galvanising an improvement and hence a capital expense. You consider the painting a repair included as part of the underpinning process and a revenue expense. The proposed works do not increase the potential sale price of each unit.

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