We have many clients having to pay special strata fees to cover large, unexpected costs for rental properties for issues such as cladding, leaking and dodgy building work. These can often total tens of thousands of dollars. The bad news is that often these are not immediately deductible against rental income.

This is because payments to cover the cost of capital improvements or repairs of a capital nature are not deductible; see Repairs and maintenance and Taxation Ruling TR 97/23.

You may be able to claim a capital works deduction for the cost of capital improvements or repairs of a capital nature once the cost has been charged to either the special purpose fund or, if a special contribution has been levied, the general purpose sinking fund. However, this will only be at 2% or 4% p.a.

Lindsay 0413 952 180