Private ruling: Rental property works
Date of advice: 19 July 2021
Published: September 2021
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a repairs deduction for the cost of the works completed during the 20XX-XX income year apart from the new stormwater line? | A1: Yes. Apart from the new stormwater line, it is accepted that the works completed during the 20XX-XX income year to your rental property were repairs rather than improvements and were not initial repairs. Therefore, a repairs deduction is allowable under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of these works. | Q2: Are you entitled to a capital works deduction at the rate of 2.5% for the new stormwater line? | A2: Yes. The new stormwater line is an addition to the rental property and therefore is not deductible as a repair. However, this improvement qualifies for the capital works deduction under section 43-10 of the ITAA 1997 at the rate of 2.5%. | Q3: Will you be entitled to a repairs deduction for the cost of the proposed works in relation to the side fence and roof when incurred? | A3: Yes. It is accepted that the proposed works to the side fence and roof of your rental property are repairs rather than improvements and are also not initial repairs. Therefore, a repairs deduction is allowable under section 25-10 of the ITAA 1997 for the cost of these works when they are incurred.

Relevant facts and circumstances: Approximately XX years ago you purchased the property which is located in a Heritage Conservation area. It was used as your main residence for a short period before you moved out and you have used it ever since for income producing purposes as a rental property. Approximately XX months ago you became aware the property required repairs and maintenance work and sought approvals from the local council to undertake the work. The council provided approval as they considered the works to be minor works for the maintenance of the property and did not have any adverse heritage impacts. Most of the proposed works were completed during the 20XX-XX income year. Some work was done to the roof last year but the proposed further works to the roof have yet to be undertaken. You are still in the process of replacing the side fence which had deteriorated to the point that it was leaning against the side of the house. Included in the works completed was the addition of a new stormwater line which was not part of the council approval process.

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