Nick owns a rental property that includes a garden shed. The property is currently tenanted. However, Nick’s builder friend coincidentally found that the garden shed was constructed of asbestos (a dangerous material that are banned by many countries). To prevent any pollution of the property and eliminate the risk of his tenants being exposed to potentially harmful asbestos fibres. Nick 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.
Can he claim the $10,000 expense as deduction?
Nick cannot claim the cost of demolition and removal under s 25-10 as repair costs. However, he 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), Nick 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 his earning activity (ie. Renting out the property). Also, this expenditure cannot be deducted under another provision outside Subdivision 40-I.
Therefore, under s 40-755, Nick can claim an immediate deduction for the $10,000.