Private ruling: Deductions - repair - capital works
Date of advice: 2 November 2022
Published: 9 January 2023
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are you entitled to a portion of the costs associated with the replacement of the tin roof and guttering that relate to the rental property as a repair and therefore an immediate deduction under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Based on the information provided to the Commissioner you are able to apportion the costs associated with the replacement of the tin roof and guttering for the period the property has been a rental property. You cannot claim a deduction for the portion of the expense that relates to the period it was your main residence. The Commissioner is satisfied that the tin roof and guttering repair is an allowable deduction, and you can apportion the expense and claim this under section 25-10 of the ITAA 1997. | Q2: Is the installation of insulation in the roof a capital expense? | A2: Yes. Based on the information provided to the Commissioner the installation of Insulation in the roof is an improvement and not a repair. The expense associated with the Insulation is not a repair and is a capital expense and cannot be deducted under Section 25-10 of the ITAA 1997. | Q3: Is the rewire of non-compliant electrical wiring an allowable deduction? | A3: No. Based on the information provided to the Commissioner the rewire work that was carried out on your rental property is not a repair and is work that is a capital expense. Taxation Ruling TR 97/23 Income tax: deductions for repairs considers what is a repair and what work carried out on a property is allowed as a repair. At paragraph 99 of TR 97/23 it specifically considers work carried out on a property due to government regulations. Any work that is done to comply with government regulations that does not remedy a defect is not considered a repair and is capital in nature.

Relevant facts and circumstances: You have a rental property. This property has been rented out since MM YYYY. Prior to the property being rented it was your main residence. In the 20YY income year you had the following expenses on the rental property: • Replacement of tin roof and guttering as roof had rusted • Installation of Insulation in the roof • Rewire of non-compliant electrical work to comply with state government requirements

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