BGL Pty Ltd recently replaced the engine in one of its boats, used for charter boat tours, with a much larger (1/3^rd larger) more fuel efficient engine. Is this cost likely to be deductible as a repair expense under section 25-10 ITAA97? A) Yes as the engine would not be an entirety as the entire asset would be the boat and so any costs that are not in relation to the entire asset would be deductible B) Yes as the costs relate to a restoration of efficiency and would not be an improvement C) No as the modifications would amount to an improvement. D) No as the costs relate an asset only used for private purposes

Question

Quizplus · Accepted Answer

The replacement of the engine with a much larger and more fuel-efficient engine would likely be considered an improvement rather than a repair, making the costs non-deductible under section 25-10 of the ITAA97.

BGL Pty Ltd Recently Replaced the Engine in One of Its