Private ruling: Rental - deductions - repairs
Date of advice: 17 December 2019
Published: February 2020
Ruling period: Income year ending 30 June 2018
Date scheme commenced: 1 July 2017.

Ruling: Q1: Are you entitled to claim a deduction for the costs incurred to replace part of the retaining walls and fencing at the Property? | A1: Yes. Based on the information provided, you have incurred costs to replace part of the retaining walls and fencing at the Property due to damage incurred over a number of years. Therefore, as your expenses meet the requirements in Taxation Ruling TR 97/23 you can claim a deduction for those expenses. Further information about repairs can be found by searching 'QC 23635' on ato.gov.au

Relevant facts and circumstances: You purchased a newly constructed property (the Property) and commenced renting it out after a number of months. Many years later there was unseasonal heavy rainfall over a number of years that resulted in water running off the property adjacent to the Property, which is located up a slope, directly into the Property. Over a period of time the footings of the fence posts had eroded and considerable soil was washed away from the retaining wall resulting in the flooding of garage, the rear of the Property, and the blocking of drainage at the foot of the retaining wall which has resulted in the house slab cracking. Additionally, there has been movement in the house and numerous walls in the house have cracked. You obtained a quote from Company A to undertake activities to rectify the identified defects. Company A completed the activities outlined in the quote and issued a tax invoice for a total cost of $XX,XXX for the following: · hire of machinery · purchase of filling, such as gravel, soil and concrete · purchase of materials, such as pine sleepers, fence posts, pine fencing rails, treated palings, geo fabric and ag pipe · cost of labour to construct retaining wall and timber fence along the side boundary; and · costs to remove soil, timber and waste materials. The activities undertaken by Company A involved rectifying defects to only a section of the Property's fencing and retaining walls, with none of the material used being different, or superior in quality, to the materials that were replaced. The Property was rented out for the entire 2017-18 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 25-10