Private ruling: Deductions - repair and maintenance costs
Date of advice: 22 May 2026
Published: 10 August 2026
Ruling period: Year ending DDMMYYYY

Ruling: Q1: Is the taxpayer entitled to an outright deduction under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for special levies incurred to fund remedial works at residential rental properties, being: • a special levy of $X for window remedial works and associated legal fees at Property A; • a special levy of $X for balcony waterproofing works at Property A; and • two special levies of $X each for roof waterproofing works at Property B. | A1: Yes. You are entitled to a deduction under section 25-10 of the Income Tax Assessment Act 1997 for the special levies in the income years in which the amounts were paid. The works carried out at each property were repairs that restored the existing structures to their original functionality and did not alter their character. Further, the works were not initial repairs carried out to remedy defects or damage that existed at the time the taxpayer first acquired the properties.

Relevant facts and circumstances: Taxpayer and properties The applicant (the Taxpayer) is an Australian resident individual. The Taxpayer is the registered proprietor of two residential units (Property A and Property B). Property A was acquired on DDMMYYYY and has been rented to a third-party tenant since YYYY. Property B was acquired on DDMMYYYY and has been rented to a third-party tenant since YYYY. The Taxpayer derives assessable rental income under section 6-5 of the ITAA 1997 from letting out the properties. Owners corporation and special levies Each building is managed by its respective owners corporation. Issues involving water ingress were identified at both buildings, regarding building elements that did not perform as intended. The owners corporations resolved to undertake remedial works to address those issues. To fund the works, the owners corporations resolved to raise special levies In relation to Property A, the owners corporation issued special levies for window remedial works and associated legal fees totalling $X, and for balcony waterproofing works totalling $X. In relation to Property B, the owners corporation issued two special levies of $X each for roof waterproofing works. The Taxpayer paid the special levies as follows: • $X for window remedial works was paid on DDMMYYYY; • $X, being part of one $X levy for waterproofing works at Property B, was paid on DDMMYYYY; • $X, being the remaining balance of that levy, was paid on DDMMYYYY; • $X for waterproofing works at Property B was paid on DDMMYYYY; and • $X for balcony waterproofing works was paid on DDMMYYYY. Nature and scope of the remedial works In respect of Property A, water ingress was identified as resulting from degraded installations, including issues addressed through window remedial works and balcony waterproofing. The owners corporation undertook window remedial works and balcony waterproofing works to address those issues and restore the affected building elements to their original condition. Legal costs were incurred by the owners corporation in engaging a solicitor to address issues associated with the defective works and to pursue rectification, and those costs formed part of the special levy raised for the remedial works. In respect of Property B, the building experienced ongoing leaks over time affecting the roof. Engineering assessments initially considered whether replacement of the roof was required. Instead, the owners corporation carried out waterproofing and associated remedial works as a temporary and preventative measure. The works included waterproofing and re-tiling of parts of the roof, as well as other measures to prevent further water damage. Timing and relationship to income-producing use The building elements to which the repair works related were already in place at the time the Taxpayer acquired the properties. The deterioration and water ingress leading to the repair works developed over a period of years due to exposure to weather and water ingress, including damage that worsened following storm events. The works are not 'initial repairs' carried out to remedy defects or damage that existed at the time the Taxpayer first acquired the properties. Rather, they are subsequent repairs and rectification works arising after years of income-producing use.

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