Are they deductible?
Enquiry:
I own a rental property that includes a garden shed. The property is currently tenanted. However, my builder friend coincidentally found that the garden shed was constructed of asbestos (a dangerous material that is banned by many countries). To prevent any pollution and eliminate the risk of my tenants being exposed to potentially harmful asbestos fibres. I engaged a licensed removalist to demolish the shed and safely remove the asbestos from the property. The cost of this demolition and removal was $10,000.
My question is, will I be able to claim the $10,000 expense as a deduction?
Explanation:
You cannot claim the cost of demolition and removal under s 25-10 as repair costs. However, you might be able to claim it under s 40-755 (deduction for expenditure for the sole/dominant purpose of carrying on ‘environmental protection activities’).
According to s 40-755(2)(a)(ii), you incurred $10,000 in demolishing and removing the shed, which was for the sole or dominant purpose of preventing asbestos pollution from the site of your earning activity (i.e. Renting out the property). Also, this expenditure cannot be deducted under another provision outside Subdivision 40-I.
Therefore, under s 40-755, you can claim an immediate deduction for the $10,000.