Edited version of private advice

Authorisation Number: 1052296791550

Date of advice: 27 August 2024

Ruling

Subject: Rental property deductions - partial underpinning of concrete slab

Question

Are you entitled to a repair deduction for expenses in relation to the underpinning work completed on parts of the concrete slab which your rental property was built on?

Answer

Yes.

The Commissioner is satisfied that the expenses you incurred to underpin parts of the property's concrete slab were done to make good damage caused by the operation of natural causes (whether expected or unexpected) during the passage of time. As the underpinning work involved a restoration of efficiency in function and they were partial, the expenses are an allowable repair deduction under section 25-10 of the Income Tax Assessment Act 1997 in accordance with the principles contained in Taxation Ruling TR 97/23 Income tax: deductions for repairs.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You own a property (the property).

You engaged a builder to build the property which was completed several years ago.

You have leased the property out since the building completion date and continue to do so at the date of the ruling application.

You incurred an expense to engage an engineer business to complete an inspection and engineer report on XX/ XX/20XX.

Cracks were identified in the property by the real estate agent immediately prior to engaging an engineer.

The report identified the following findings:

Exterior:

•         Garage entry door frame gaps

•         Bed 1 feature column crack

•         Bed 1 front window reveal gap

•         Bed 2 window reveal gap

•         Kitchen wall crack

•         Living wall/soffit lining gap

•         Garage rear door frame gaps

Interior:

•         Garage slab cracks (not serious)

•         Hallway/living (tiny) ceiling cornice crack

Floor level variations at the front were more than the allowed tolerances.

Causes of the cracking were reported as being due to foundation soil movements and backing up in the storm drains.

The level variations at the front of the property were significant and it was likely that the property movements and damage would be ongoing.

Stabilizing and correction of levels would require conventional underpinning.

The report recommended repairs and maintenance to gutters, drains, downpipes and trees close to the property to be removed, in addition to the underpinning work.

The report stated that general movements causing ongoing cracks and gaps will occur regardless of any repairs and maintenance as a result to variations in temperature and humidity.

You incurred an expense on XX/XX/20XX to engage a qualified underpinner to install the underpinning under the concrete slab of the property, as per the recommendation in the engineer report.

The underpinning was completed on the front edge and halfway down one side edge of the slab as per the engineer's report.

The property continued to be occupied by the tenants at the time of the partial underpinning taking place.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 25-10

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