Private ruling: Rental deductions - holding costs
Date of advice: 28 February 2024
Published: 15 April 2024
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for the holding costs to your rental property at your rental property? | A1: Yes.You are entitled to claim your holding costs as a deduction under section 8-1 of the Income Tax Assessment Act 1997. Your intention is to repair the property and continue deriving rental income. The temporary cessation of income-producing activity does not break the nexus between your outgoings and production of assessable income. The deductibility of capital works, repairs and maintenance has not been considered by this private ruling. Further information about the types of expenses you can claim can be found by searching ato.gov.au for 'QC 23635.'

Relevant facts and circumstances: You purchased a property several years ago. You are the sole owner of the property. The property has been used as an investment property for several years. You signed a new lease with a tenant to rent out the property. You alerted the body corporate that water was entering your apartment from an outside source. The body corporate initially did not accept liability and blamed a construction company that was conducting work on the apartment building. The body corporate did not initiate action to repair the source of the leak. Your tenant broke the lease due to the apartment being uninhabitable caused by the leak. You continued to prompt the body corporate to fix the leak and they eventually fixed the source of the leak however the property sustained damage. Your insurance company would not begin repairs to your property until the source of the leak was repaired. While the source of the leak was repaired, the insurance company is still going through their own process to finalise the matter before starting repairs to your property. You have landlord insurance. The insurance will only cover several weeks loss of rental income however you have not received any payments yet as the insurance company believes the matter has not been resolved yet. The property has been untenanted and vacant since your tenant broke the lease and remains uninhabitable. You intend to rent out the property as soon as the repairs are finalised.

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