Asbestos removal costs

Question from Vivienne Tan updated on 4th March 2022:

Our expert Mark Withers responded:

Firstly, if the property is private and the costs incurred are in relation to making it fit for purpose as a rental they are private and domestic costs as there is no direct nexus with income. Only maintenance costs associated with maintaining the property whilst a tenancy is in place are deductible. The same applies to dilapidation repairs, the term given to describe works done to a property post acquisition pre tenancy.
When determining whether works to any property are deductible you first identify the asset, in this case the asset is the building as the asbestos forms part of the building rather than constitutes an asset in its own right.

Secondly you need to consider whether the works go above and beyond what could reasonably be considered maintenance of a building. This is the hurdle the IRD have used to thwart many leaky building remediations.

Finally, beck to the dilapidation repairs.. If the property was purchased with knowledge that the asbestos would need removal the price would have reflected that, so the costs would be capital works improving the home. The mere passage of time does not alter that. As stated though, given the works are occurring whilst the home is in private use, there is definitely no deduction.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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