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ATO Interpretative Decision

ATO ID 2002/291 (Withdrawn)

Income Tax
Rental Repairs - repair to substantial part of entirety

Attention This ATO ID is withdrawn.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Status of this decision: Decision withdrawn 24 March 2017.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.


Are the costs incurred for the partial rebuilding of an external protective wall of a rental property deductible repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?


Yes. The costs incurred for the partial rebuilding of an external protective wall are deductible repairs under section 25-10 of the ITAA 1997.


A rental property the taxpayer has owned for 20 years includes an external protective wall.

After a periodical inspection found the wall to be collapsing, approximately 85% of the wall was demolished and rebuilt on its original foundations.

The works included the building of two additional internal buttress walls to offer ongoing structural integrity, and the use of larger blocks of better quality dimensional sandstone. The original wall was not extended in height or length.

Reasons for Decision

Section 25-10 of the ITAA 1997 allows a deduction for the cost of repairs to premises used for income producing purposes.

Subsection 25-10 (3) of the ITAA 1997 precludes a deduction for repairs where the expenditure is of a capital nature.

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] HCA 54 (the Thomas Case )).

Taxation Ruling TR 97/23 deals with the issue of deductions for repairs.

TR 97/23 provides that expenditure for repairs to property is of a capital nature where the extent of the work carried out represents a renewal or reconstruction of the entirety (paragraphs 36-42), or the works result in a greater efficiency of function in the property, therefore representing an 'improvement' rather than a 'repair' (paragraphs 44-58).

An 'entirety' is defined as something 'separately identifiable as a principal item of capital equipment' ( Lindsay v. FC of T (1960) 106 CLR 377 at 385; [1961] HCA 93).

In Case S13 85 ATC 171, two retaining walls were built on a rental property to prevent soil erosion. Following storm damage, the walls were replaced in a different location with walls that were higher, stronger and of different material. The expenditure incurred for constructing the new walls was held to be an improvement to a fixed capital asset and not repairs.

The taxpayer's external protective wall was the entirety as it was readily identifiable as a separate item of capital equipment.

As the original foundations were retained, and the location and length of the wall were unchanged, the works represented a repair to a substantial part of the wall that had deteriorated by ordinary wear and tear during the passage of time (the Thomas Case ). Also, the marginal enhancements that were introduced in the design and material structure of the wall represented a replacement of something that was already there with its modern equivalent, rather than an improvement to a fixed capital asset ( Morcom & Ors v. Campbell-Johnson & Ors (1955) 3 All ER 264).

Accordingly, the costs incurred by the taxpayer were for a repair and were not capital in nature. The taxpayer is entitled to claim a deduction for the expenditure incurred under section 25-10 of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
20 February 2015 Reasons for Decision Insert medium neutral citation
  Case references Insert medium neutral citation

Date of decision: 7 March 2002

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

Case references:
W Thomas & Co v. FC of T
   (1965) 115 CLR 58
   [1965] HCA 54

Lindsay v. FC of T
   (1960) 106 CLR 377
   [1961] HCA 93

Case S13
   85 ATC 171

Morcom & Ors v. Campbell-Johnson & Ors
   (1955) 3 All ER 264

Related Public Rulings (including Determinations)

Related ATO Interpretative Decisions
ATOID 2002/292
ATOID 2001/30

Repairs & maintenance expenses
Repairs in entirety
Rental expenses
Rental property

Siebel/TDMS reference number: CRS71736; 1-6B0G0IJ; 1-AZNVSUJ

Business line: Small Business/Individual Taxpayers

Date of publication: 28 March 2002

ISSN: 1445-2782

ATO ID 2002/291W history   Top  
   Date   Version 
    7 March 2002   Original statement   
   20 February 2015   Updated statement   
 You are here ®  24 March 2017   Withdrawn   


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