Hi all,
Just recently settled an investment property and was getting around to doing the book keeping of all the associated costs with purchasing a property.
I've noticed a bunch of items which I've paid for whether it be through my mortgage loan or lawyers/conveyancer which I have little knowledge over and wasn't sure:
a) how should these items be classified and in what category of expenses does it fall under?
b) are these tax deductible and I should be providing these to my accountant at EOFY?
Common items seen:
- Property / Title Searches
- Settlement Costs
- Stamp Duty
- Registration of Mortgage
- Registration of Land
- Discharge of Mortgage
- Clearance Certificate
- Loan Approval Letter
- Government Search Fees
- Pest & Building Inspection
Any input from an accountant or experienced investors welcome.
Thanks in advanced.
Hi Jate
Provide your accountant with everything – including the loan offer document for your IP which outlines all of the fees/charges and your rental statements from your PM. A good accountant will capture everything – but it also helps to be organised.
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]
Hi Jamie,
Yep 2014 new year's resolution told myself to be more much organized, hence I was trying to get everything pre-listed out and pre-categorized and into separate folders for each IP so that it would make it easier for the accountant rather that sending him a shoebox of just papers. Hopefully someone on the forums has some input on those items listed so I can get a head start.
Cheers,
Hi Jate,
As a "broad brush" approach, anything to do with the having a lender issue you a Mortgage(s) are a Borrowing Cost (which are usually claimed back at 20% per year over 5 years). So these would include things like (from your example):-
Property / Title Searches (could be – if the search was requested by your lender)
Stamp Duty (if this is Stamp Duty on Mortgage)
Registration of Mortgage
Registration of Land (if related to Borrowing)
Discharge of Mortgage (did this discharge relate to "borrowing the money?")
Clearance Certificate
Loan Approval Letter
Government Search Fees (could be – was the search related to "borrowing the money?")
The rest (thinking back now – it has been a while) would be Purchase Costs which I believe are capitalised and only recoup as a deduction on Sale.
Hope that helps – but your Accountant will know for sure….
Benny
Jate remember if the loan incurred mortgage insurance it is also a Tax deductible expense.
Had a new forum client contact me at the weekend whose Accountant had not claimed his LMI on his existing IP for the last 2 years.
LMI is deductible over 5 years or the term of the loan whichever is lesser and is proportional in the first year of ownership depending when you settled in the year.
Don't rely on your Accountant read up yourself on what you and cannot claim.
The following link to the ATO website may help you.
http://www.ato.gov.au/Media-centre/Articles/Tips-for-rental-property-deductions/
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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