ATO Interpretative Decision
ATO ID 2002/330
Rental property repairs - replacing worn carpet by polishing existing floorboards
FOI status: may be released
Status of this decision: Decision Current
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Is the taxpayer entitled, under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to a deduction for expenditure incurred in removing worn carpets and polishing existing floorboards in a rental property?
Yes. The taxpayer is entitled, under section 25-10 of the ITAA 1997, to a deduction for expenditure incurred in removing worn carpets and polishing existing floorboards in a rental property.
The taxpayer owns a residential rental property.
The taxpayer removed carpet in the property and has polished the existing floor boards.
Reasons for Decision
Section 25-10 of the ITAA 1997 allows a deduction for expenditure incurred for repairs to premises or depreciating assets held or used solely for the purpose of producing assessable income.
Taxation Ruling TR 97/23 explains the circumstances in which something will be considered to be a 'repair' and an allowable deduction.
Paragraph 88 of TR 97/23 states that a repair involves a restoration of something without changing its character. The significant factor is the restoration of efficiency rather than exact repetition of form or material. For example, in Case 51 (1960) 9 CTBR (NS) 328, it was held that the replacement of a galvanised iron roof with concrete roof tiles was a repair as it did little more than meet a need for restoration. The material in question was designed to perform substantially the same function as that which it replaced.
Polished floorboards perform substantially the same function as the carpet. The materials and processes used in the repair do no more than restore the floor to a functional walking surface (Example 8 in TR 97/23).
Replacing worn carpets in a rental property by polishing the floorboards does not materially alter the character or functionality of the rental property. Nor does it increase the life of the rental property.
The removal of the carpets and polishing of the floorboards is a repair. Accordingly, the expenditure incurred is deductible under section 25-10 of the ITAA 1997.
Date of decision: 27 September 2001
Income Tax Assessment Act 1997
(1960) 9 CTBR(NS) 328
Related Public Rulings (including Determinations)
Deductions and expenses
Repairs & maintenance expenses
Siebel/TDMS Reference Number: DW295861; 1-69IY366
Business Line: Small Business/Individual Taxpayers
Date of publication: 28 March 2002
Date reviewed: 9 February 2015