Rental property deductions partly denied Print E-mail

The AAT has partly affirmed the decision of the Commissioner to disallow additional deductions in relation to a rental property as the taxpayer was not able to substantiate some of the claims: AAT Case [2012] AATA 174 (AAT, Ref No: 2011/2025, Ettinger SM, 21 March 2012).





The taxpayer owned various rental properties in regional NSW. The present case concerned one of the properties which had been vacant for five years. For the 2007 income year, the taxpayer originally claimed rental expenses of $4,170 for interest and $2,500 for other expenses, totalling $6,670, in relation to that property.

Subsequently, the taxpayer requested the rental expenses be increased by an additional $5,208.47 in relation to interest, telephone, electricity, insurance, repairs, inspection, and other costs. The Commissioner disallowed the additional deductions for the reason that the rental property was not available for rent in the 2007 financial year. The taxpayer argued that the property was available for rent and the vacancy was due to the remote location.


The Tribunal held that based on the evidence, it was satisfied the property was available for rent in the 2007 financial year, "although efforts to find suitable tenants did not appear to have been vigorous, the location of the property is likely to have been a factor". The Tribunal then considered the deductions claimed by the taxpayer and held that amounts in relation to advertising ($102.20), lawn mowing ($100), electricity ($100), and insurance ($245) be allowed.

However, in relation to the remaining deductions, the AAT held that it was not satisfied the taxpayer had discharged the "burden of demonstrating a sufficient nexus between all the expenditure incurred, and the deductions claimed relating to the property for the production of assessable income for the purposes of s 8-1(1)(a) of the ITAA 1997". Accordingly, the AAT partly affirmed the Commissioner's decision to disallow the additional rental deductions.


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