Private ruling: Rental expenses - repairs or capital
Date of advice: 23 February 2021
Published: April 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the portion of the special levy for works carried out on the rooftop and facade, excluding installation of new fences and drainpipe, be an allowable deduction in the year incurred? | A1: Yes. The portion of the special levy incurred in relation to the works carried out on the rooftop and façade of the building your rental property is in, excluding installation of new fences and drainpipe, 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 unit complex. A building inspection was completed, and remediation works were required for the rooftop and façade of the building due to water damage. The rooftop and façade of the building are classed as common property of the building and are not owned by any one tenant. The body corporate of the building issued a special levy to undertake the works required, and a total amount due was decided for each unit. All unit owners paid the special levy and a building contractor was engaged by the body corporate to carry out the required works. The building inspection report states a new drainpipe may be required, and the owner's corporation has elected to install new fences on the roof. These works are new additional installations to the building, and you accept that they are not repairs. The balance of the works carried out was as follows: Rooftop Mainly due to settling of the building over time, cracks in the rooftop garden beds, flashings and joints caused water penetration into the top floor apartments. The work included removal of garden beds, waterproof membranes, flashings, and tiles. New waterproof membranes and flashings were installed and the rooftop was re-tiled. The new tiles used were similar to the old tiles. The garden beds were not reinstated due to the added cost. Façade Also, mainly due to settling of the building, some cracks had formed in the render on the sides of the building. The cracks then allowed water to penetrate behind the render causing it to become drummy and to separate from the wall. The sides of the building were checked for loose render which was removed and the spalling fixed.

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