Hello All
Does anyone know the correct treatment for the sale of a rental property bought before 13 May 1997? My understanding is that while I am able to claim a deduction for capital work i.e the cost of the building, these deductions are not taken into consideration when the property is eventually sold.
For eg, my property was acquired for $80,000 & the costs of the building was $50,000. While I can claim a special building write off of $1250 each year, when I sell the property, my cost base is still $80,000.
Would appreciate any input.
Hi,
It does not matter when you bought the property (unless it was pre-CGT).
It’s very unlikely that you will be eligible to claim an outright deduction for capital improvements.
However, you may be able to either write them down or alternatively depreciate them. Whether or not this is applicable must be discussed with your accountant as the rules are a little tricky.
If the capital costs cannot be depreciated or written off then they may still form part of the property cost base. That is, if you have a property you bought for $80k and you spend $50k renovating it (which is non deductible), then the cost for CGT purposes will be $130k when you sell.
The cost base is then recued to the extent that the expenses are deductible or written off.
Cheers,
Steve McKnight
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**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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