ATO Interpretative Decision
ATO ID 2002/1026 (Withdrawn)
Landlord - Costs associated with relocating tenants
FOI status: may be released
||This ATO ID is withdrawn. Guidance relating to the issue addressed in this ATO ID can be found in the Rental Property Guide (NAT 1729) published to ato.gov.au (QC 23626).
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 24 March 2017.
|CAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is the taxpayer, a landlord, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the costs incurred to reimburse tenants as a result of them having to move into short-term accommodation?
Yes. The taxpayer, a landlord, is entitled to a deduction under section 8-1 of the ITAA 1997 for the costs incurred to reimburse tenants as a result of them having to move into short-term accommodation.
The taxpayer owns an investment property.
During the income year, various repairs were completed in relation to the investment property which resulted in the property becoming unfit to occupy.
As a result the tenants, who have a current lease over the premises, had to move out of the property and take temporary accommodation at a hotel.
The taxpayer reimbursed the tenant's temporary accommodation costs.
Reasons for Decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
Expenses that are 'incidental and relevant' to the taxpayer's income earning activities are considered to be sufficiently connected with the derivation of assessable income and therefore will be an allowable deduction under section 8-1 of the ITAA 1997 (Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47;  HCA 15; (1949) 4 AITR 236; (1949) 8 ATD 431).
Therefore, providing that the expense can be objectively viewed as a necessary or natural consequence of the taxpayer's income earning activities, the expense will be 'incidental and relevant' to the income earning activities of the taxpayer.
A landlord is expected to provide premises which are fit for occupation. The taxpayer failed to provide such premises for a temporary period following the completion of the faulty repairs. In recognising their failure to provide suitable premises, the taxpayer reimbursed the tenants for the cost of their short-term accommodation.
In these circumstances the taxpayers expenditure can be viewed as a natural consequence of the taxpayer's income earning activities as a landlord and therefore 'incidental and relevant' to the derivation of rental income.
Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the costs incurred to reimburse their tenant's short term accommodation costs.
|Date of amendment
|6 June 2014
||Reason for Decision
||Updated case references
||Updated case references
Date of decision: 23 October 2002
|Year of income:||Year ended 30 June 2002|
Income Tax Assessment Act 1997
Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation
(1949) 78 CLR 47
 HCA 15
(1949) 4 AITR 236
(1949) 8 ATD 431
Related ATO Interpretative Decisions
ATO ID 2002/1027
Repairs & maintenance expenses
Landlord & tenant
Siebel/TDMS Reference Number: CW3102432; 1-AZN8GY1
Business Line: Small Business/Individual Taxpayers
Date of publication: 30 October 2002
|ATOID 02-1026 history