Tax Deductable Expenses - Investment Properties

niish150887 on 25/07/2022 - 16:46

Hi All,

I know these two questions are for an accountant but was wondering if anyone who have/had investment properties claimed the below expenses for tax purposes

1) Economic Costs to break your fixed loans and
2) Costs to obtain a planning permit for construction of 3 townhouses (Can these be claimed in the same year when the expenses were paid or can be claimed when the construction is finalised - Note the property is in individual name)

Thanks

Financial

Comments

  • CyberMurning on 25/07/2022 - 16:49

    how about changing the cooktop ($500), and then whole hot water system ($2,500)
    depreciate them for how many years ? or give to the depreciator so they can add it to the report?

    • wei13 on 25/07/2022 - 20:53
      +1

      Search TR2021/3 at the ATO for list of effectively life.

  • bemybubble on 25/07/2022 - 17:00
    +4

    Economic Costs to break your fixed loans

    Yes

    Costs to obtain a planning permit for construction of 3 townhouses

    Are you planning to sell them? If you are then you would claim them as a developer. If not then it's a capital expense and can't be immediately deducted but will add to the cost base of the property.

    • niish150887 on 25/07/2022 - 17:07

      Thank you - This makes sense :)

      • bemybubble on 25/07/2022 - 17:10

        Are you planning to sell?

        • niish150887 on 25/07/2022 - 17:13

          Not sure to be honest - with rising construction costs we are still deciding. May just sell with plans and permits

          • bemybubble on 25/07/2022 - 17:14
            +2

            @niish150887: Do get advice. If you have a profit making motive you could be up for GST and lose your 50% discount. Just as an FYI…

            • netjock on 25/07/2022 - 21:21
              +1

              @bemybubble: Correct. OP might get professional advice to set themselves up as a charity.

            • mskeggs on 26/07/2022 - 07:27

              @bemybubble: If you don’t mind sharing, what’s the reasoning here?

              • bemybubble on 26/07/2022 - 08:28

                @mskeggs: Basically comes down to case law - Whitfords Beach and Myer Emporium are the seminal cases in regards to isolated transactions being treated as ordinary income as opposed to capital gains.

                GST then kicks in as under the act New Residential Property is considered a taxable supply for GST purposes.

                Basic rule of thumb is What was your intention from the outset - the burden is on the taxpayer always to prove this.

                Seen it a lot where people get caught out thinking they made a capital gain from a property development but most of the time are taxed on 100% of the income and then cop the GST.

                If you want to deep dive into the above a google search of 'isolated profit making property ATO' will show a bunch of private rulings of people seeking clarity on the same thing.

    • firestint on 26/07/2022 - 11:53

      What is included in economic costs to break a loan usually?

      • bemybubble on 26/07/2022 - 12:24

        Break costs such as fees and penalty interest

  • The Wololo Wombat on 25/07/2022 - 19:19
    +3

    I love how ur building three townhouses and you don't know the answer to these questions haha

      • The Wololo Wombat on 25/07/2022 - 20:41
        +2

        What make you think I was being sarcastic (I wasn't). I came to help you… but the answer was already given… are you usually this tight? (that was sarcasm ;) )

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