Ask Ban Tacs Question
Are these balcony works a repair or improvement?
Hi Julia,
I recently had to fix damage on the balcony of my investment property. The total cost was $23k. Normally rent is around $42k but this financial year it was $34k due to some vacancy. I had the property built in 2008 and it has been rented out from 2010 to now.
I wonder if you can check my self assessment that these are repairs rather than improvements? I’ve done my best to evaluate against TR 97/23 and now would really value your wisdom about it!
I scoured the TR 97/23 document to understand it. Frustratingly I found the examples were not too helpful. I also looked at quite a few private rulings, but none really matched my situation.
It was not a planned balcony renovation, rather a series of repairs as problems were discovered over a 5-month period. I have three separate invoices for these repairs:
THE SUPPORT BEAM (July 2025 – $4,756)
Inspection revealed the wood balcony support beam had bent and cracked after 17+ years of weather exposure, threatening structural integrity. A metal support beam was placed under the existing beam and bolted to the original, untouched brick support columns.
THE HANDRAIL (December 2025 – $8,508)
Following the beam repair, a later inspection discovered the corner post was leaning, causing the steel cables to sag to 15cm gaps (exceeding the 12.5cm safety minimum). The wooden posts and cables were replaced with a metal frame. Metal was chosen because it attaches properly to the newly installed metal support beam.
THE DECKING (December 2025 – $9,812)
During the railing replacement, it was discovered that the joists under the decking had water damage. The decking had to be removed to apply waterproofing tape to the joists. The 17-year-old decking boards were already warping, splitting, and had rising nails (a tripping hazard). Instead of re-nailing the hazardous timber back down, new Eco-deck composite boards were installed.
MY SELF ASSESSMENT (Based on TR 97/23)
Support Beam (July 2025 – Invoice 19517: $4,756.40)
- The Defect: Inspection revealed the wood balcony support beam had bent and cracked, threatening the structural integrity of the balcony.
- The Fix: A metal support beam was placed under the existing support beam and bolted to the original, untouched brick support columns.
Assessment against TR 1997/23:
- Repair vs Improvement (TR 1997/23 #17 & #44): The metal beam was installed to restore the ability of the beam to hold the balcony up. It is utilitarian, did not increase the rent, and did not change the character of the balcony. It merely restored the efficiency of function.
- Material (TR 1997/23 #50-52): The use of powder coated steel is a modern equivalent material. It provides no new function; it simply reinforces the original structure to prevent collapse.
- Entirety (TR 1997/23 #39): The beam is a subsidiary part of the house/balcony. The original brick support columns remain intact.
Conclusion: Immediate repair.
Handrail (December 2025 – Invoice 19674: $8,508.50)
- The Defect: Following the beam repair, it was discovered that 17+ years of weather exposure caused the corner post to lean, making the steel cables slack. Gaps reached 15cm (exceeding the 12.5cm safety minimum). The post connections to the base were rotten.
- The Fix: The wooden posts and cables were removed and replaced with a modern equivalent metal frame to restore safety compliance.
Assessment against TR 1997/23:
- Repair vs Improvement (TR 1997/23 #17 & #44): The replacement rail restored the balcony to a safe function (no illegal gaps, stable upright posts). The metal is utilitarian, gets hot in summer, and obstructs more view than the old cables — it is not an aesthetic or capital improvement. Rent was not increased.
- Material (TR 1997/23 #50-52): Metal posts were required because attaching a metal post to the newly repaired metal support beam allows proper bolt tension. It spans the same length and height. It is a modern equivalent.
Conclusion: Immediate repair.
Decking (December 2025 – Invoice 19807: $9,812.57)
- The Defect: During the railing replacement in December, it was discovered that the joists/beams under the decking had water damage. The decking had to be removed to apply waterproofing tape to the joists. The 17-year-old decking boards themselves were warped, splitting, and had rising nails (presenting a tripping/cut hazard).
- The Fix: Instead of re-nailing the hazardous, warped timber back down, new Eco-deck composite boards were installed over the repaired joists.
Assessment against TR 1997/23:
- Anticipatory Repair (TR 1997/23 #93): The removal of the deck was necessitated by the need to fix the joists. The replacement of the boards rectified existing physical deterioration (warping/splinters/nails) and prevented further deterioration of a more serious and hazardous nature.
- Material (TR 1997/23 #50-52): Composite (Eco-deck) was chosen for budget reasons ($15/lm vs oiled timber at $16/lm). The decking has disadvantages compared to oiled timber: it is synthetic in appearance, and lacks the natural look of wood; composite decking gets uncomfortably hot underfoot in summer, scratches more easily, and cannot be resurfaced like wood. No new function was added; it simply covers the rafters to provide a flat walking surface.
- Entirety (TR 1997/23 #39 / PBR 1052098812632): The decking is a subsidiary part of the building. As per ATO logic in private rulings, if the foundations/footings remain intact (which the brick columns and main housing attachment did here), replacing decking boards is repairing a subsidiary part, not replacing an entirety.
Conclusion: Immediate repair.
MY QUESTION
What do you think Julia? Is my self assessment reasonable against TR 1997/23? I responded to damage by making repairs over a 5 month period. I used modern equivalent materials that were appropriate for safety of my north facing balcony that is exposed to a lot of sun and rain. I made my balcony safe again for my tenant and got no increase in rent as the function is the same.
Answer
I am so impressed with your research and it is great that I can speak to you at this level.
I totally agree that there is no replacement in its entirety as the entirety would be the whole house in my opinion unless there is something very separate about the deck and as you say the footings remained anyway.
My issue is with the materials used. You have not replaced like with like so we are looking at modern equivalent for example PVC replacing concrete pipes. This is a bit of a value judgement that I am not really qualified to give. A reliable opinion would have to come from a builder or like. My personal unprofessional opinion would be that the synthetic decking timbers is a modern equivalent. Firstly because they were not available when the original deck was built. Secondly because it seems quite common these days to build a deck from those materials. Just like PVC pipes are a no brainer compared with concrete.
When it comes to adding metal beams because the wooden beams were failing that doesn’t fit as well. After all both options were available when the deck was originally built. So not a modern equivalent. And while the fixing mechanism may have been the catalysts to the metal rails it is still part of the whole activity of replacing wood with metal.
If the metal is considered to be an improvement, as you are probably already aware this will mean you can only depreciate the expense over 40 years and there is no allowance for the cost of the alternative wood repair. So I can see it is important to find what we can to argue like with like or modern equivalent.
The most recent case I am aware of on this matter is Wulf’s https://www.austlii.edu.au/
- Paragraph 23 of Wulf the different material had a longer life.
- Paragraph 57 of Wulf, enduring benefit, improved appeal and market value possibly regarding the metal rail as it is going to last longer.
- TR 97/23 paragraph 44 I feel that using metal will increase the life of the deck to a greater extent than if another wood beam was used. Though paragraph 46 concedes that you can make a part of the property better in some ways and still be a repair. It is the significance.
- TR 97/23 at paragraph 50 argues that no change in the function, just different materials means it is a repair. It is hard to balance that with paragraph 44 where a material with a longer life makes it an improvement.
- TR 97/23 paragraph 123
“123. What is determinative of deductibility under section 25-10, if different material is used, is whether the work done restores the efficiency of function of the property (without changing its character), not whether the same material as the original is used. We accept that use of different material may result in a minor and incidental degree of improvement in the property but still only restore the efficiency of function of the property. If the degree of improvement is more than minor and incidental, the expenditure is of a capital nature and not deductible under section 25-10.”
I think the superior life expectancy is significant not minor or incidental even though it was the obvious alternative but that is because it “reduces the likelihood of repair bills”.
Similarly, it could be argued the decking timbers “reduce the likelihood of repair bills” The difference I see here is that it is a cheaper option that was not available back in the day so a modern day equivalent. It might even be considered that as the decking timber is more obvious than the beam, appearance matters and the synthetic timber does not look as good as natural timber so not an improvement.
Have a look at example 7 in TR 97/23 replacing wood with steel, an improvement.
As you can see from TR 97/23 and Wulf I cannot offer you certainty just my opinion. For anything to be bullet proof you are going to have to apply to the ATO for a private ruling. This would not be that hard to do as you already have the research. I attach the form. Support your argument with a report from a builder if possible about modern equivalent maybe on the basis that timber has become more expensive……..Including a professional opinion would be valuable because so much of the above is very much in the eye of the beholder.
Please note this answer is limited by the information you have provided and should not be relied upon without further professional advice on your particular circumstances.
