1 Is the payment made for damp proofing walls and supplying water proofing membrane materials a deductible repair expense under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes, the expenses are deductible under section 25-10 of the ITAA 1997, which provides that expenditure incurred for repairs to any premises held or used for the purpose of producing assessable income are an allowable deduction. Question 2 Is the payment made for internal painting to attend to the areas affected by damp repairs a deductible repair expense under section 25-10 of the ITAA 1997? Answer Yes, the expenses are deductible under section 25-10 of the ITAA 1997, which provides that expenditure incurred for repairs to any premises held or used for the purpose of producing assessable income are an allowable deduction. Question 3 Is the payment made for the internal painting to attend to wear and tear a deductible maintenance expense under section 8-1 of the ITAA 1997? Answer Yes. Expenses incurred that prevent or fix deterioration of an item that occurred while renting out your property for the purpose of producing assessable income are considered maintenance. Your expenses meet the requirements of section 8-1 of the ITAA 1997. This ruling applies for the following period : Year ended 30 June 20XX The scheme commenced on: 1 July 2020
You purchased a property. You are the sole owner of the property. The property is a townhouse in a complex. The property is held on a Strata Title. From XX 20XX until XX 20XX the property was rented at market rates. From XX 20XX until XX 20XX the property was your main residence. From XX 20XX until currently, the property has continually been a rental property, rented at market rates. In XX 20XX there was a flooding event at the property. The Strata covered new drainage to address the flooding event. There has been no flooding at the property from the point in which the drainage issue was addressed. In 20XX your tenant advised of mould in a back wardrobe. The mould was removed by cleaning. In XX 20XX the mould reappeared and was cleaned. In XX 20XX the mould reappeared and was larger in size. On XX 20XX, your tenants moved out when their lease ended. In XX 20XX tests were performed on the walls to determine if there were any damp issues. The tests indicate that the damp issues in the townhouse were almost certainly caused by the flooding event which resulted in water seeping into brickwork and running along the internal cavities of the property.
You engaged contractors whilst the property was vacant to repair the damage. The following works were undertaken: • Render stripped back on sections of the wall • Removal of lowest layer of bricks and vacuum out of cavity • New water proofing membrane laid to stop future damp from rising • The bricks that were removed were dried and were re-bed • Higher sections of the affected walls had new water proofing membrane added • All sections of the affected walls were re-rendered • Once the re-rendered walls had dried, you engaged a contractor to fill holes and cracks, and paint • The contractors painted internal walls, ceilings, doors, frames, and skirting • Some of the painting was to repair wear and tear by the tenants • Most of the internal painting was to the repaired walls affected by damp repairs As soon as the works were completed the property was immediately advertised for rent. The property was either tenanted or available for rent during the financial year that the works were completed. On XX 20XX, new tenants moved into the property.
The property has remained a rental property following the completion of the damp repairs.
Income Tax Assessment Act 1997 section 8-1 Income Tax Assessment Act 1997 section 25-10 Detailed reasoning General deductions Under section 8-1 of ITAA 1997 you can deduct for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature. You have rental income and can claim certain rental expenses as a deduction. Subsection 25-10(1) of the ITAA 1997 allows a deduction for the cost of repairs to premises, or a part of the premises, used solely for income-producing purposes. However, subsection 25-10(3) of the ITAA 1997 does not allow a deduction for repairs that are considered capital expenditure. Division 43 of the ITAA 1997 allows deductions for capital works expenditure. The fo