Forums / Getting Technical / Legal & Accounting / Valuation & claimable expenses

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  • Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59

    Hi all

    Couple of questions….

    If I purchase a ip & Reno am I up for cgt from day dot or can I get a valuation done before it is rented after work is completed?

    Are rates claimable before tenants move in or only after?

    How does a depreciation schedule work on renovations to a older property? Say paint or refitting a bathroom?

    Thanks

    S

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,376

    Hi Simon,
    Note I am not an accountant or similar – so this are what I “think” is the situation:-

    If I purchase a ip & Reno am I up for cgt from day dot

    No CGT until you sell – but (what I think you are meaning) are you wondering what Cost Base that CGT is calculated from? As I understand it, the Cost Base is calculated from the Purchase Price, Costs of Purchasing, plus any Capitalised expenses (e.g. the reno you are just doing). As an example, let’s say you buy for $400k, it costs $30k for Stamps and/or other purchase costs, and then you spend $40k on a reno. The cost base would therefore be 400 +30 +40 = $470k.

    Then, when you sell it, the price you got, less selling costs is used to determine the Capital Gain. e.g. you sell it for $620k, and it costs $30k to sell, so $590 less the Cost Base (470) is your Gain. You then get taxed on $120k (or 50% of that if owned for more than a year) at your Marginal Rate.

    That’s roughly it – other things do come into play, but that is where more advice is needed. e.g. other Capital Costs you might expend during the years you hold the property, and there seems to be something else involving Depreciation that I am not sure about – perhaps others can step in with some thoughts there….

    or can I get a valuation done before it is rented after work is completed?

    You can choose to get a valuation done any time you like – I don’t believe it would affect anything re CGT or the calculation thereof – but hey, I could be wrong…. let’s hear from others on that, as I am still learning too…. ;) And there might be other benefits of doing such a val (unrelated to CGT).

    I hope that is some help,

    Benny

    Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59

    Hi Benny

    Thanks for the reply. Questions answered.

    Cheers

    S

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    It all depends. Cgt may not apply and you may be taxed as income under some situations.

    No need for a valuation unless it was your main residence.

    All holding expenses could be claimed in some circumstances while you are holding and renovating even though you are not advertising for rent but only where you intend to rent it out after finishing.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59

    All holding expenses could be claimed in some circumstances while you are holding and renovating even though you are not advertising for rent but only where you intend to rent it out after finishing.

    Hi Terry

    Yes this is what I want to know. I am paying interest, insurance, rates ect while holding & renoing but is this and deprecation claimable as there is no tenant yet? The property is 100% IP & will be rented as soon as work is completed. I am just concerned that the expenses may require a income to be claimed against?

    Also is termite barrier treatment 100% claimable?

    Thanks

    Simon

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Probably would be deductible if your intention was to rent it at end of Reno’s. See Steele’s case.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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