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ATO Interpretative Decision

ATO ID 2001/30 (Withdrawn)

Income Tax
Deductions and expenses: Rental Property (Repair of Foundations)

Attention This ATO ID is withdrawn. Guidance on the basis of the decision in this ATO ID can be found in Taxation Ruling TR 97/23 Income Tax: deductions for repairs .
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 24 March 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Whether expenditure incurred in underpinning the foundations of a rental property is deductible under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)


The expense incurred in underpinning the foundations is capital in nature and is not deductible under section 25-10 of the ITAA 1997.


The taxpayer owns a rental property. The ground beneath the rental property subsided. The taxpayer subsequently underpinned the entire foundation by adding a further foundation under the existing foundation.

Reasons For Decision

Section 25-10 of the ITAA 1997 allows a deduction for expenditure incurred for repairs to premises or plant that you held or used solely for the purpose of producing assessable income. The word 'repair' is not defined within the tax legislation. Accordingly it takes its ordinary meaning. 'Repair' involves a restoration of a thing to a condition it formerly had without changing its character (W Thomas & Co v. FC of T (1965) 115 CLR 58; (1965) 14 ATD 78; (1965) 9 AITR 710). In this context it is restoration of efficiency in function rather than exact repetition of form or material that is significant. Whether or not work done upon a thing is properly described as a repair of that thing is a question of fact and degree.

Expenditure will be on capital account if it is for alterations that go beyond fixing damage accumulated during a taxpayer's use of an asset in producing income (BP Oil Refinery (Bulwer Island) Ltd v. FC of T 92 ATC 4031; (1992) 23 ATR 65 ). Alterations may restore the function of an item and be on revenue accounts, but alterations that change the character of the item will be on capital accounts and not deductible.

In underpinning the entire foundations, the taxpayer inherently changed the nature and character of the income producing property (Case V2 88 ATC 107; AAT Case 4012 (1987) 19 ATR 3038 and ACT Construction Ltd v. Customs & Excise Commissioners [1979] 2 All ER 691). The underpinning goes beyond restoring the property to its original state and alters the character of the property. Accordingly the underpinning work is a capital improvement rather than a repair and therefore is not deductible in the year of income.

Amendment History

Date of amendment Part Comment
14 October 2013 Decision, Reasons for Decision and Case References Format and style changes for consistency
  Related ATO IDs Inserted related ATO IDs

Date of decision: 9 July 1997

Legislative references:
Income Tax Assessment Act 1997
   section 25-10

Case references:
W Thomas & Co v. FC of T
   (1965) 115 CLR 58
   (1965) 14 ATD 78
   (1965) 9 AITR 710

BP Oil Refinery (Bulwer Island) Ltd v. FC of T
   92 ATC 4031
   (1992) 23 ATR 65

Case V2/AAT Case 4012
   88 ATC 107

AAT Case 4012
   (1987) 19 ATR 3038

ACT Construction Ltd v. Customs & Excise Commissioners
   [1979] 2 All ER 691

Related Public Rulings (including Determinations)
TR 97/23

Related ATO Interpretative Decisions
ATOID 2002/292
ATOID 2002/291

Initial repair expenses
Rental expenses
Rental property
Repairs & maintenance expenses

Siebel/TDMS reference number: UMG21843; 1-AZYDRAO

Business line: Small Business/Individual Taxpayers

Date of publication: 4 June 2001

ISSN: 1445-2782

ATO ID 01/30 history   Top  
   Date   Version 
    9 July 1997   Original statement   
   18 October 2013   Updated statement   
 You are here ®  24 March 2017   Withdrawn   


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