Just wondering if the costs of looking for IPs (travel, accommodation, etc) can be added to the cost base of eventual purchases?
If so, is there some limit on what would count? For example, if I spent two months going to 10 different places just to find one IP, would the costs of all that travel, accommodation, etc. count as part of the cost base of that IP (assuming it is all for that purpose and not just a holiday)?
GP
Hi GP,
Interesting question; not sure about that. I was always under the impression that a deduction for associated costs on IPs was applicable only when you actually owned them, I have never thought about the “looking for” part….hmmmmm….???? Even if they were possible claims, how would one prove the purpose of these expenses (that is, that one isn’t just having a day out with the family etc????) [blush2]
Maybe one of the tax gurus out there can clarify this further for both of us!! [blink]Cheers,
Jo
Jo,
Thanks for the response.
I was always under the impression that a deduction for associated costs on IPs was applicable only when you actually owned themI thought I saw elsewhere recently that the costs of obtaining an IP (eg. lawyers fees for inspecting contracts, building and pest inspections, etc) were effectively part of the purchase price – although I don’t know about when the purchase doesn’t go ahead (like can you count the costs of inspections on three properties as part of the cost of obtaining just one?).
Even if they were possible claims, how would one prove the purpose of these expensesWell that dilemma already exists for any business travel, even if you already own the places. If a trip to inspect your IP on the Gold Coast takes two weeks, and your folks just happen to live there too, the tax office probably wouldn’t accept that it was all investment related and I believe would pro rata the costs on what amount it decided was legit business and what was holiday.
ISTM that the cost of finding an IP is not much different to the cost of improving one to get it ready to rent. Both relate to preparing for investment income before actually receiving any.
And can I help it if all the popular holiday spots also happen to be good places to look for IPs? [
]GP
Yea, but how will the Tax Dept. know your folks live there? And even if there is some-one living there by the same name as you how can they prove that they are related?
Don’t know, but it would seem that the Taxation Dept. has its hands full with Taxation and Tax cheats and don’t have too much time to become like the ‘KGB’.Cheers
C@34
Hi GP,
In answer to your question re business travel expenses and so on; as I said, I am not disputing the validity in making claims when travelling around town looking for an IP, which is why I think further investigation into the feasibility in doing so would be highly recommended.
As for the bit about, such expenses as lawyers fees, building inspections etc etc etc being claimed, of course they can be; you have a “contract of sale” to prove that you are in the process of buying the property to which these expenses are incurred. Should the sale fall through as you have suggested, I am not really sure, because this has never happened to me or anyone I know (although I am sure it does).
That’s why I think a tax guru in the forum may be able to shed some light, for both of us!! [book]
BTW….could you please tell me what ISTM stands for???? That’s a newie to me!!! [blink]
Many thanks,
Jo
Jo,
although I am sure it doesIt happened to me when I was looking for my PPoR. I had a place with an accepted offer, contract signed, deposit cheque written, valuation, building and pest reports done, finance arranged, and was just waiting at home for confirmation of the exchange from my solicitor. Days dragged into a couple of weeks with the vendor’s solicitor constantly stalling, and then the vendor finally withdrew the house from the market – allegedly because the place she had planned on buying fell through. About a month or so later I heard it was back on the market and shortly got sold for about $20K more than my accepted offer (I didn’t bother putting in another one though). That was around 1997 or 1998.
Ultimately it was for the best though, as I found and bought a much better place a couple of years later (where I still live).
could you please tell me what ISTM stands for???? That’s a newie to me!!!Sorry, shorthand obviously doesn’t travel well between forums!
ISTM = It Seems To Me
GP
Originally posted by calvin@thirty4:but how will the Tax Dept. know your folks live there?
They may well not, but I think they might be suspicious of any possible holiday location if your trips were of any length or too frequent for the claimed purpose of travel.
Mind you, if I go to Tassie and need to travel from Devonport to Queenstown to inspect an IP and decide to save some money by walking the overland track rather than driving, is that any business of theirs? [ponder]
GP
Thanks for the ISTM explanation….I like that, may use it (nice and easy) [rolleyesanim]
Anyway, about the sale falling through on you….THAT’S AWFUL!!!! [glum2] But I am curious though, surely once contracts are signed by both parties, and money is paid over, the sale would have to go through as a legally binding deal???? [book]
Sorry GP, I am really confused, [blink]can you please clarify how this was permissible???? I always understood it, that once a contract of sale was signed, and “cooling off” periods had lapsed, that the sale HAD TO go through.
Have I been wrongly informed????? I would hate that to happen to me, or to anyone for that matter. Did you get your money back, including all costs (ie legals etc)?????
Jo
Jo,
Originally posted by Monopoly:surely once contracts are signed by both parties, and money is paid over, the sale would have to go through as a legally binding deal????
Sorry, I mightn’t have explained that properly. I had signed my contract and given it and the deposit to my solicitor, but she hadn’t signed hers. I left his office having been told the exchange would take place the next day, but it just never happened.
Even he was getting frustrated by the end as the vendor’s solicitor wasn’t telling him anything other than that they weren’t quite ready.
I do believe she really did have problems with the place she was going to buy – the building inspection apparently highlighted a costly repair she hadn’t expected and she decided to pull out (the REA was a friend or relative of hers and was helping her with it all), but it was still a big nuisance and a let-down at the time.
But as I say, all for the best in the end!
Did you get your money back, including all costs (ie legals etc)?????I got the deposit cheque back, and the initial holding deposit, and the solicitor didn’t charge except for a few outgoings, but it still cost me the three reports and a lot of wasted time.
GP
[sweaty] relief!!!!
Thanks GP,
I was beginning to think I had it all wrong!!!
Glad it all worked out for the best, for both of you actually.
Cheers, [sunny]
Jo
Hi Greatpig,
Not an accountant so disclaimers apply.
You can claim costs associated with the acquisition of a property such as travel and accomodation – these are not deductible but rather they are used to offset the cost base of the property and reduce any capital gains liability.
As to whether or not this equally applies to the general looking process – I would contend that while you are not classified as a ‘professional investor’ probably not – however when you get multiple properties then you may have a case to claim the general looking stage of research.
You would need to have some sort of paper trail to verify what you are claiming – diaries, appointments with REA, records of kilometres travelled, receipts/invoices for expenses incurred and so on. Ultimately you need to prove to the ATO that you can justify the claim.
As with all travel and accomodation ‘claims’ these are apportioned in accordance with time spent doing property related work – in essence spend a fortnight in the area and can only prove one day of proeprty activity – claim/cost offset is one forteenth of total costs.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by Derek:As to whether or not this equally applies to the general looking process – I would contend that while you are not classified as a ‘professional investor’ probably not – however when you get multiple properties then you may have a case to claim the general looking stage of research.
Thanks for your input, Derek. It would be nice if it was possible to claim it [smiling]
You would need to have some sort of paper trail to verify what you are claiming – diaries, appointments with REA, records of kilometres travelled, receipts/invoices for expenses incurred and so onHmmm… perhaps I should just get my wife to follow me round with a super-8 movie camera [rolleyesanim]
If it doesn’t impress the tax office, I might at least be able to release it as a movie…
GP
Originally posted by GreatPig:Hmmm… perhaps I should just get my wife to follow me round with a super-8 movie camera [rolleyesanim]
If it doesn’t impress the tax office, I might at least be able to release it as a movie…
GP
Just keep your clothes on[biggrin]
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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