Tax deductions for asbestos-affected investment properties

Last week, I had a discussion with one of our RealRenta Landlords about whether or not she is entitled to certain tax deductions, if she finds out her investment property contains asbestos.

This is such a great question, so we searched the ATO’s website and the following is straight from the source:

·        If you are the owner of a residential or commercial investment property that is affected by asbestos, then certain tax deductions may be available. If you sell the property, the tax implications will vary depending on your circumstances.

o    Capital gains tax (CGT)

o    Claiming expenses

o    Environmental protection costs


o    Capital gains tax (CGT)

The ATO works with state and territory governments to ensure property owners are aware of the potential tax implications of participating in a buyback program.

If you participate in a buyback program, the tax implications will vary depending on your situation:

o   Owner-occupiers.

If the property has been used solely as your main residence for the entire period of ownership, there are no tax implications for the disposal of your property.

o    Investment property owners.

There are tax implications if you participate in a buyback program. These will depend on your circumstances, including whether the property was

ever used as your main residence and how long you have owned it.

  • Claiming expenses

Asbestos contamination in a property may mean that the property can no longer be rented out, or tenants need to vacate for a period.

Interest on loans against the rental property, and other expenses, such as council rates, water and land tax, may continue to be deductible, if asbestos contamination means that no rental income is collected.

If there is a period when the investor cannot let out the property, but it can be let out after remediation, interest is

Taxation Ruling TR 2004/4

Other expenses that you can generally claim on a rental property may continue to be deductible, depending on the nature or extent of the situation. These include:

    • repairs and maintenance – for example, ensuring living areas are sealed from contaminated areas, such as ceiling, internal cavities and sub-floor
    • depreciation for written-off and replacement assets, such as carpet
    • capital works for replacement buildings, fences and similar.

Environmental protection costs

If your asbestos-related remediation expenses are not covered by the above deductions, costs to remove asbestos from a rental property can be classified as an environmental protection activity under section 40-755 of the Income Tax Assessment Act 1997External Link.

Source: https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Asbestos-affected-rental-properties---income-tax-deductions/

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Marlene Liontis
Monday, 11 November 2019

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