Private ruling: Rental deductions
Date of advice: 7 October 2024
Published: 18 November 2024
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to an immediate deduction for the cost of repairing the swimming pool at your rental property under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Section 25-10 of the 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 97/23 Income tax: deductions for repairs explains the circumstances in which expenditure incurred by a taxpayer for repairs is an allowable deduction under section 25-10 of the ITAA 1997. In your case, resurfacing the pool was required due to deterioration and repairs were carried out to fix the deterioration that had occurred since being occupied by tenants. Repairs were also carried out to fix the crack in the pool beam and pool shell. The works carried out to the pool did not change the character of the property and does not amount to an improvement, is not a replacement of an entirety or an initial repair. The work done merely restored the former condition of the pool. Therefore, you are entitled to an immediate deduction for the cost of repairing the pool at your rental property under section 25-10 of the ITAA 1997.

Relevant facts and circumstances: You purchased a property in 20XX. The property was rented from the acquisition date until January 20XX when you lived in the property for a short period of time. In 20XX, you commenced renting the property again. During 20XX, the pool began to show signs of deterioration. You engaged the services of a qualified repairman to fix the issue, however whilst this occurred, further damage was sustained. You engaged with a second business to repair the pool, however the pool sustained even further damage and the builder claimed that it could not be repaired. A third business was engaged, and the pool was repaired and restored. You have incurred expenses of $XXXX to complete this work. You tried to claim the pool repairs with your insurer but you were unsuccessful.

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