Hi guys,
I have just purchased an investment property about 3 months ago. Due to the fact I have not had it long before this financial year is over, it turns out that the total rent for this financial year will be about $3000 whilst the interest charged on my loan will be about $3500.
I’m pretty sure I have more than $3000 worth of deductions for the investment property, ie. interest, rates, body corps, insurance, conveyancing etc. etc.
What happens if the deductions exceed $3000? I have my income from work as well, about $80,000 a year…. Does this mean that I will pay tax on $83000 – total deductions for investment property? Or is the investment property expenses only deducted against the rent income and not my personal income from work?
Also my property is about 17 years old. Is it worth getting a surveyor to conduct a depreciation assessment?Or do accountants have standard formulas which will return a similar amount back at tax time? It is a 3bdr unit which I have purchased for $310,000.
Hi there
Firstly, yep – grab a depreciation schedule. 17 years isn’t that old – you’d still be able to claim a fair bit.
Easiest way to think about negative gearing is to:
Add up all your income (rent)
Add up all your expenses (interest repayments, body corp, insurance, rates, depreciation, etc)
Income minus expenses = holding costsThe holding costs will be taken off your taxable income.
So in your situation – it looks like the holding costs over the 3 months is $3500 (income minus the interest and other expenses). If you earn $80k – your new taxable income will be $76,500.
These are just rough figures (and shouldn’t replace the advice of a qualified accountant) but hopefully it helps.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
So if my expenses were say $5000 (deductable) and my rent income is $3000 and my income is $80000, the amount of money i will pay tax on this year is $80000 + $3000 – $5000 – (work related expenses) ?
chrisaus wrote:So if my expenses were say $5000 (deductable) and my rent income is $3000 and my income is $80000, the amount of money i will pay tax on this year is $80000 + $3000 – $5000 – (work related expenses) ?That’s right Chris.
Hi Chrisaus, it is VERY worthwhile to get a quantity surveyor to set you up with a depreciation schedule. Most will refund the cost if they cant find it in their schedule so you really have nothing to lose- but lots to gain back in your tax! Accountants might give you a refund but quantity surveyors are usually more aggressive in what they depreciate and how they do it. Its easy. I set mine up over the phone and internet and they sent me pdf. My girlfriend bought a property – like you- close before tax time and was VERY pleasantly surprised at what she got back.
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