I believe my accountant was not working for me regarding claimable deductions on my rental properties – can anyone assist ?
My situation is this – I believe inspection visits or visits to rental properties are tax deductable (or at least some of the expenses incurred – I’m not sure which ones??)- Settled on land in Dec 2004 and building was supposed to be completed according to builder by 10th June so arrived there to find there was probably another month’s work to be done however spent the entire time whilst there either at the house or estate agents or making purchases for the house ie it was all business. Even though the property has not been income producing during 2004 to 2005 tax year can I claim the trip’s expenses in the 2004-2005 tax year ?
My accountant wasn’t even going to claim the interest on the loan nor % of borrowing costs and I know that these are legitimate claims…..Thanks in advance…MikalaJudy Cooke
Hi Mikala,
I’m no expert, but my understanding is that unless the property is actually rented out, then you can’t claim the costs that you’re talking about.
Landt.I agree with landt64. Hope you didn’t sack your Accountant ’cause they’re correct. To claim expenses (of any type) you must have assessable income to claim them against. All this stuff is up-front costs! Might have been wise to check first… Harsh, but that’s how it goes.
Software for people, not computers.
Most of the expenses you mentioned are capital costs – ocsts of setting up your business as a property investor and are unlikely to be deductible.
Interestingly the interst is deductible – there have been a number of test cases that have come down in favour of the investor for this.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auOriginally posted by MichaelYardney:Most of the expenses you mentioned are capital costs – ocsts of setting up your business as a property investor and are unlikely to be deductible.
Interestingly the interst is deductible – there have been a number of test cases that have come down in favour of the investor for this.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auJudy Cooke
Originally posted by MichaelYardney:Most of the expenses you mentioned are capital costs – ocsts of setting up your business as a property investor and are unlikely to be deductible.
Interestingly the interst is deductible – there have been a number of test cases that have come down in favour of the investor for this.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auJudy Cooke
Hi Michael,
Thanks for your reply – on my first IP the taxation department has allowed for borrowing costs claimable over 5 years so wouldn’t it be the same for this one as long as the intent is for investment only even though no income has been earned yet it should be able to be claimed against other income such as wages or other rental income for other investment properties? Also they have allowed in the past for inspection visit expenses (such as petrol to travel there)so that is why I was thinking that the expenses such as flight fares, accomodation and meals would all be legitimate deductions providing that the property is intended for investment purposes only despite the fact that no imcome has yet been earned….your thoughts ???….Judy
Judy Cooke
Hi Mikala,
My understanding of it (though I am not an accountant), is that you can claim:
1. The costs of interest on borrowings if there is the intent for this property to produce income (eg you intend to rent it, even if you aren’t renting it while it is being built)
2. The associated loan costs (eg mortgage insurance, loan set up fees etc) over 5 years or the life of the loan, which ever is shorter.You cannot claim any travel costs etc relating to purchase PRIOR to the property actually producing income (as a deduction) though you may be able to claim this as a capital cost against capital gains to reduce your CGT when you sell. I think this can be tricky though.
The ATO simply draws the line on costs associated with purchase.Maybe do some searching on the ATO’s website http://www.ato.gov.au/
Or contact the ATO and speak to a consultant.
The_Hound.
Thanks the Hound,
What you have said makes sense to me so I will talk to a consultant – hopefully the discussion on these issues has enlightened some other investors on this area of deductions…..Judy
Judy Cooke
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