Private ruling: Deduction of repair costs to a rental property
Date of advice: 8 January 2018
Published: June 2018
Ruling period: Year ended on XX June 20XX
Date scheme commenced: XX July 20XX

Ruling: Q1: Is the roof replacement regarded as a deductible repair to the rental property? | A1: Yes Section 25-10 of the Income Tax Assessment Act 1997 allows a deduction for the cost of repairs to premises used for income producing purposes, to the extent that the expenditure is not capital in nature. As highlighted at paragraph 40 of TR 97/23, a roof is part of a building, that is, the building is the entirety. As such the replacement of the roof is not regarded as a renewal or reconstruction of the entirety. We conclude that the replacement of the roof is not an initial repair, is not the replacement of an entirety, is not an improvement and is in respect of an asset used in the production of assessable income. Hence the replacement of the tin roof with a like product tin is a deductible repair under section 25-10 of the ITAA 1997.

Relevant facts and circumstances: You have a rental property. Prior to a storm event the roof was in a serviceable condition. Storm damage occurred to the property resulting in the tin roof being lifted off the sub structure. Repairs undertaken were like for like replacement of tin to the roof, flashing, gutters and downpipes. Repairs were carried out by a company at a cost in 20XX, a receipt of the repairs is held on file for substantiation purposes. All expenses incurred for the repair was remitted by the taxpayer. A claim was made to the insurer and the claim was declined due to the age of the property. No other work, modifications or improvements were carried out by the repair company.

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