All Topics / Legal & Accounting / Where to claim investment books on tax return?

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  • Profile photo of bbearbbear
    Participant
    @bbear
    Join Date: 2006
    Post Count: 3

    I have purchased some property investment books last financial year. Do I claim these as a rent deduction of my tax return? It must be either here or self education expenses. If I claim as a rent deduction and I have multiple investment properties, do I apportion it against each property? Then if any of those are jointly owned, do I have to split with my partner even if they don’t make use of the books?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I just claim against self education – think that is the correct section.

    Terryw
    Discover Home Loans
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    Profile photo of bbearbbear
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    @bbear
    Join Date: 2006
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    That’s what I did last year, well every year. However must have read more throroughly this year, it states D1 through D5 is for deductions related to your work as an employee. So maybe that term is used broadly to include any income producing activity. If I claim it here then that would mean my investment activities are conducted as an employee of a business. Which means I am missing out on some deductions as I am an employee of my own business in my investment activities. So I can claim the same expenses as a business owner? Like the one I have been trying to get for years…expenses of travelling to look at potential property for my portfolio. If I was a property investment business owner I would claim these expenses. However I have never claimed these costs as a deduction.

    Anyone else have an opinion on this one?

    Profile photo of TerrywTerryw
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    @terryw
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    Whether you could claim to be in the business of property investing would probably depend on how many properties you own. my guess would be 4+, but it would depend on the values etc.

    Why not give the ATO a call.

    Terryw
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    Profile photo of bbearbbear
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    @bbear
    Join Date: 2006
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    Because the ATO is too conservative, they will probably say as a guide you should have 10+ properties or something. I know they are free of course whereas I would have to pay an accountant to work this out for me. I have completed my personal tax returns myself up until now but its just started getting interesting now. We did some travelling last fin year trying to source our third investment property, which will settle in a couple of months. So I will be hiring an accountant who specialises in property investment over the next few weeks to get my structure right before settlement and probably do my future returns as it will probably involve trusts so will be more complex. So I’m not against paying for good avice and a good accountant (in fact I highly recommend it for most circumstances, not just someone who adds up your receipts, but someone who will provide good advice and they are not cheap), just hoping to get by for one more personal tax return on my own while I’m small enough. Plus even if you have a good accountant, it can still pay to be educated yourself. My investment resources have only been small until this year so it didn’t bother me where I put it on my return previously.

    Profile photo of TerrywTerryw
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    @terryw
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    Hi Bear

    In the end, it doesn’t really matter where you put expenses as long as it all adds up. A few years ago one of the property accountants told me that having 4 properties would have made me able to claim that I was a professional investor. Don’t take this as advice, just as a guide.

    Terryw
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    Profile photo of RealEstateQueenRealEstateQueen
    Member
    @realestatequeen
    Join Date: 2005
    Post Count: 69

    to bear,

    i just wanted to tell you to be careful about claiming business expenses.
    I dont know about other states, but in my state, you have to be a registered agent to ‘carry on in the business of real estate, frequently trading’. This means you have to go do numerous very expensive courses. About 10k worth here in my state, just to fulfil a legal obligation.
    You cant be operating a ‘business’ without being accredited. I know your not saying your operating a business, but if your claiming expenses in a business sense in your tax, then what are you doing? Do you know what i mean? The eventual drama if you are caught is just not worth losing what youve already built up. Its not a risk worth taking for the benefit of a few tax deductions.

    That said, i claimed about $700 on all the books i bought last financial year, i think it was as said before, as self education. I know i was also able to claim all of it because i manage my own properties. I dont whether you do, but this helps to claim alot of things. I claimed everything in my office, my computer, fax, printer, desk, and chair!

    Just something to think about…

    Profile photo of truebluetrueblue
    Member
    @trueblue
    Join Date: 2003
    Post Count: 142

    I wouldn’t claim the books under self eductaion as the 1st $250 is not allowable.

    I’ve always claim them under technical books in the rental statement. Doesn’t really matter if you allocated them or not as it’s consolidated in the tax return.

    If your properties are in jt names, they have to be allocated accordingly.

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    You also need to establish a direct link between the book (or course or seminar etc) and what you are doing.

    Technically, as an investor, I cannot claim expenses if I bought a reno book as I don’t do renos. You need to be able to establish the link if ever you were audited.

    People need to remember that just because the ATO paid or billed you in accordance with your own calculations it doesn’t guarantee that they have recognised all claims. The ATO now refunds or bills based on your documents submitted and then passes your paperwork onto te back room people where it may be comprehensively assessed. They use the dipstick method of auditing and one day your number may come up.

    Derek
    [email protected]
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    Profile photo of trajiktrajik
    Member
    @trajik
    Join Date: 2005
    Post Count: 102

    I am an accountant and tax agent. D1-D5 are only for work related (ie employee related) expenses. The books should go as an expense in the rental schedule, which is then apportioned between the owners. Whether or not you apportion the books between the properties doesn’t matter as the end result is the same. Usually a property is owned 50-50 with your partner and so all income & expenses are also split 50-50. This can be gotten around through an effective salary sacrifice reimbursement agreement with your employer. You could argue that you personally incurred the cost and not the other partner, if so you would put the claim at Item 20U – Other Rental Deductions

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