old fibro garage at an IP

[donkey]

I have an old fibro garage at my IP. Its structurally sound despite being on a slight slant at one end (due to a previous tenant changing the window frame a few yrs ago).

Recently one of the tenants kids kicked a ball into one of the walls and there was a crack and a hole caused. The PM notified me and took photo at the quarterly inspection and I had it fixed / covered with a new sheet of fibro.

I was asked by the PM if the fibro was asbestos and I said I did not know but I suggested it probably was not.

From a legal perspective, I fixed the damage right away and no further issues to report. If the fibro is actually all asbestos am I legally bound (according to NSW legislation) to remove / replace the garage?

If injury is caused to a tenant in this situation would the 20 million legal liability on my home building insurance cover this- in the unlikely event of a claim of asbestos poisoning?

Its duly noted that when I emailed the PM asking if I should remove the garage and replace it with a new one, they did not answer the question/ query at all....

many thanks

 

[Paul@PFI]

Fibro isn't illegal. It is a prohibited building material. Provided it isn't burnt !!, drilled, sawn, cut or sanded and the surface is painted it poses no concern. There is more harm from removing it in many cases. The tenants could visually determine there was asbestos and I would argue a neighbours garage may also be made from it.

The lead based paint on the asbestos is as much a concern. It may have been sealed by a non-lead based paint and also poses no concern.

Read this tax determination - Covering costs of removal and destruction. The replacement garage (steel ?) would be eligible for capital works deductions etc

 

[donkey]

Thanks so much paul. thats really useful information.

cheers

 

[donkey]

I've had it confirmed that the asbestos garage would not need to be removed by a specialist asbestos contractor. Any competent builder / worker can do the job and it can be claimed as a tax deduction....
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We assume that the shed was not used for agricultural or pastoral operations. We also assume that the rental property containing the shed was acquired post-CGT. Please let us know if our assumptions are incorrect.

1. Generally, a shed would be considered as capital works instead of a depreciating asset or plant unless it is used for agricultural or pastoral operations. As such, the shed in your client's case would be a capital works and its demolition would not trigger a balancing adjustment event.

2. A building that sits on post-CGT land is normally part of the land for CGT purposes. As such, if the shed was demolished but the rental property was not sold/ disposed of, and no proceeds were received for the shed, no CGT event would be triggered and the demolition costs should form part of the cost base of the rental property.

3. However, the cost specifically incurred to remove asbestos materials from the rental property may be immediately deductible under section 40-775 ITAA 1997 if it represents environmental protection activities.

Section 40-755 allows a deduction for expenditure (including capital expenditure), incurred by taxpayers for the sole or dominant purpose of carrying on eligible ?environmental protection activities?.

These activities include the preventing, fighting or remedying of pollution which includes contamination of the environment by harmful or such potentially dangerous substances as asbestos. The pollution or waste must be of, on or from a site on which the taxpayer carried on, carries on, or proposes to carry on an activity for the purpose of producing assessable income.

4. In your client's case, there should be a reasonable argument for the client to deduct the costs associated with the demolition and removal of the asbestos shed if the shed was demolished for the sole or dominant purpose of carrying on eligible 'environmental protection activities'.

We are not aware of any requirements that the asbestos shed must have been removed by an asbestos removal specialist for it to be deductible under section 40-775. However, the client would need to demonstrate to the ATO that the cost incurred was to remove the asbestos materials as part of an eligible 'environmental protection activities' and all asbestos materials were removed from the area occupied by the demolished shed.

Please note that there may be a risk that ATO would not allow the demolition and removal costs of the shed that do not directly relate to the removal of asbestos material from the shed area. These costs would form part of the cost base of the rental property. Your client may want to identify these capital costs.

 

[Scott No Mates]

We are not aware of any requirements that the asbestos shed must have been removed by an asbestos removal specialist for it to be deductible under section 40-775. costs.

Yes however Workcover places strict limits on how much bonded asbestos that an unlicensed contractor may remove. Linky

 

[Paul@PFI]

If a unlicensed or specialised contractor isn't needed I see no nexus to the environmental protection costs. I could knock it down ? How does that assist anything ? If its performed by a general building contractor how is it not just another demo ?? I wouldn't read permissiveness into the ATO decision in their ID. The taxpayer than has to ensure the protection elements are satisfied it seems.

IMO its like medical expenses must be incurred from a licensed medical practitioner. ie faith healers cost cant be claimed no matter what you believe.

I would ensure the tradie operates within license and meets workcover requirements. This includes how waste is tipped. There are cut price bandits who will dump it in the street.

The ID says...The demolition expenditure was for the sole or dominant purpose of preventing contamination or pollution of the site by harmful and potentially dangerous asbestos in that it was primarily directed to that purpose under the duty of care owed to the tenants under common and state law.

I cant see a tradie who lacks asbestos handling licensing being capable of satisfying the italicised element of the ATO decision. Its a risk that remains with the taxpayer if they choose a simple cheap option.

 

[Paul@PFI]

I've had it confirmed that the asbestos garage would not need to be removed by a specialist asbestos contractor. Any competent builder / worker can do the job and it can be claimed as a tax deduction....

This isn't ATO advice. Or a ruling. It appears to be general advice from a tax advisory service like knowledgeshop. Its doesn't actual say "any competent builder / worker".

This form of reading permissiveness into a opinion is dangerous. It clearly says "reasonably arguable". That means its open to dispute in the absence of a private ruling.

Just checked the EM to the law change and the record keeping requirements may involve using expertise and being able to proven the activity....Most taxpayers will maintain records for their own purposes of types and levels of pollution or waste which result from their business activities, and of the methods and costs of dealing with these emissions. These could be used to substantiate a claim for deduction of allowable environment expenditure.

Where a taxpayer proposes to carry on an income-producing activity, the taxpayer should have records of the types and quantities of pollution or waste likely to result and of the mechanisms and plant needed to control or manage this pollution or waste. These records could be used to substantiate claims for pollution prevention measures or waste management expenses incurred ....