Private ruling: Rental deductions
Published: March 2014
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the underpinning and replastering of cracked walls carried out on your rental property? | A1: Yes


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

Reasons for decision: Summary: Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the cost of repairs to premises used for income producing purposes. However, subsection 25-10(3) of the ITAA 1997 does not allow a deduction for repairs where the expenditure is of a capital nature. Taxation Ruling TR 97/23 explains the principles and the circumstances in which expenditure incurred for repairs is an allowable deduction. Taxation Ruling TR 97/23 states at paragraph 15 that a repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character, and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes during the passage of time. In your case the work carried out to the rental property was to underpin the existing wall relating to one side of the property and the replastering of the cracked walls. The work was not required to be carried out to the property in its entirety. The underpinning and replastering of your rental property restored the property to its original position. This does not materially alter the character or functionality of the rental property. The work carried out is a repair. Accordingly the expenditure incurred is deductible under section 25-10 of the ITAA 1997.

Relevant facts: You own an investment property which needed an emergency repair to a side wall to repair cracks and prevent the wall from collapsing. | The work was carried out in two parts. The first part was underpinning the wall to stabilise it and prevent it from falling further. | The second part was carried out some months later to replaster all the cracked walls.