Private ruling: rental property expense
Published: January 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to claim a deduction for maintenance payments and sinking fund contributions to the body corporate for your investment property? | A1: Yes.

Relevant facts and circumstances: You own an investment property. You make payments to the body corporate maintenance fund. You make payments to the body corporate sinking fund (renamed capital reserve fund).

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in the course of gaining or producing assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature. Payments made to body corporate or owners corporation administration funds and general purpose sinking funds are considered to be made for the provision of services and are generally an allowable deduction. Such fees are fully deductible in the income year in which they are incurred, provided the property is rented, or available for rent, for the whole of the income year. However, if the owners corporation required you to make payments to a special purpose fund to pay for particular capital expenditure, these levies are not deductible under section 8-1 of the ITAA 1997. In your case, you are required to make contributions to the body corporate maintenance fund and the body corporate sinking fund. These fees are not payments to a special purpose fund and are therefore deductible under section 8-1 of the ITAA 1997.