Hi all,
I own a few IPs, I’m thinking of hiring a property manager (not a realestate agent), but rather my cousin to manage the operations, eg. strata meetings, pay bills, screen tenants etc. I’m planning to pay him, will that be tax deductible? His payment will be a lot and will make my IPs negative geared. Is that legal?
Regards,
PropertySeeker-
This topic was modified 7 years, 8 months ago by
PropertySeeker.
Hi PS,
Although I am NOT an accredited adviser, I would think that if your transaction with your cousin was at “arms length”, then there would be no issue. But “arms length” is the operative phrase.It swings on your meaning of “His payment will be a lot!”
If this “lot” is an unrealistically high “lot”, then I would think you will have a hard time justifying it – indeed, in a worst case scenario, you might even be facing fraud charges (the ATO might take quite a dim view, and they have a LOT of power, so don’t take chances).
But if your cousin has expertise in this area, and you are paying him a similar amount you might need to pay to an unrelated party for the same work, then “Why not?” The latter sounds like it should be doable and reasonable. Of course, a private ruling would ensure your safety.
And because I am NOT an accredited adviser, I will be very interested to read any replies from those who are !! ;)
Benny
Hmmm.
There are two questions here really. The first is deductibility. I would imagine from a taxation perspective your “hired help” would be tax deductible. Check with your accountant. Note that if any of these properties are held in a SMSF you’ll probably run into strife employing yourself or a related party.
However the more important issue is you not being represented by a (real estate) licensed PM that is up to speed with tenancy laws etc.
I think it would be fine if you were using your cousin to just do admin (eg pay bills). However I do not think it is a good idea to have your cousin do anything relating to the tenancy itself. I don’t see tribunal looking favourably upon your case with no licensed PM in the equation, and also your insurance premium is likely to be higher due to the fact insurers deem it a higher likelihood of there being tenancy problems (and thus a claim) if no licensed PM is in the equation.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I’d imagine he would need to be licensed otherwise your insurance may be voided. I’d do some thorough investigating before hand.
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Hi all,
Thanks for the replies. Yes I will also have a registered agent to manage the tenants, my cousin will just be doing admin stuff like paying bills like strata/water/council, selecting tenants (short listed by agent), attending strata meetings etc. Initially I had the agent doing all this but they didnt do a very good job so I took it back and did it myself, now I’m trying to offload to my cousin.
So it is tax deductible which is great, now the question is how much should I pay him? Or should I say how much he charges me, is this entirely upto us how we decide this? I’m thinking of $1000 quarterly, making it $4000 yearly for his services. Is this too much, will ATO have an issue?
Regards,
PropertySeeker-
This reply was modified 7 years, 8 months ago by PropertySeeker.
-
This topic was modified 7 years, 8 months ago by
You must be logged in to reply to this topic. If you don't have an account, you can register here.
