Earlier in the year we had an IP purchase fall through but incurred about $1000 in legal fees and builders inspection (which we had got after contract exchanged). Builders report was BAD so we pulled out. Are our costs incurred tax deductible given that we were undertaking an investment activity (that ultimately led to no income?
I don't think the are – unless you are in the business of investing in residential property.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
We have since bought an IP in the same suburb which will have an income. Would that change things?
House Call wrote:We have since bought an IP in the same suburb which will have an income. Would that change things?Buying a different house is – unfortunately – irrelevent for tax purposes.
The costs incurred in purchasing an investment property, such as building inspections and conveyancers costs etc, are capital in nature and not deductible against income. Capital losses can only be offset against capital income. You would be able to carry the loss forward until another IP was sold.
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