Hi

I think you need to look at IT 2167 (Income Tax Ruling – just look it up on the ato website)

Arms length letting of an identified part of a residence, e.g. a bedroom, with access to general living areas

9. This heading typifies a situation which is commonly encountered. A variety of arrangements may occur in situations of this nature. The rent payable may cover variable or running costs such as electricity, heating, etc. or the arrangements may require the tenant to pay, in addition to rent, a separate amount towards variable or running costs. The heading would also cover situations where board and lodging is provided.

10. The situations represented under this heading call for apportionment of expenditures incurred in respect of the residence to determine what amounts may be allowed as income tax deductions. Inevitably it will be a question for decision in each case. As a general approach apportionment should be made on a floor area basis, i.e. by reference to the floor area of the residence to which the tenant/lodger has sole occupancy together with a reasonable figure for access to the general living areas including garage and outdoor areas. If, for example, the tenant/lodger had sole occupation of one room in the residence and shared the general living areas equally with the owner/occupier, it would be appropriate to add one half of the floor area of the general living areas to the floor area of the room of sole occupancy in order to make the necessary apportionment. In some cases access to the general living area may be restricted to the kitchen, bathroom, a laundry – it would be necessary to restrict the reasonable figure for access to general living areas to those rooms.

11. Where the tenant/lodger, in addition to paying rent, or an amount for board and lodging, is required to make a separate contribution to specific variable or running costs such as electricity, heating, etc., the question arises whether the separate contribution is assessable income. On the basis that the separate contribution represents part of the reward of the owner of letting part of his residence, the amounts are considered to be assessable income. If the arrangements are such that the separate contribution is made on a precise sharing of costs basis the assessable income will be offset by allowable deductions. If the separate contribution is a fixed amount income tax deductions will be allowed for the part of the variable or running costs attributable to the tenant/lodger's use of the relevant facilities.

12. The approach to be followed in cases arising under this heading has been framed on the basis that the rent charged by the owner represents a normal commercial rent. If the amount charged is significantly less than the normal commercial rate, enquiries would be justified to ascertain the reason for the lower charge. The basis of apportionment in cases of this nature will be determined on the facts of each case having regard to the reason for the lower charge.

Occupancy of part of a residence on the basis of the occupants' sharing household costs such as food, electricity and cleaning, etc.

18. What will be decisive in cases of this nature will be the characterization of the arrangements, i.e., do they produce assessable income. Situations arise where the owner of a residence permits persons to share the residence on the basis that all the occupants, including the owner, bear an appropriate proportion of the costs actually incurred on food, electricity, etc. Arrangements of this nature are not considered to confer any benefit on the owner. There is no assessable income and the question of allowable deductions does not arise.

19. Care should be taken to ensure, however, that what may be termed ordinary tenancy arrangements are not dressed up in the form represented by the above heading. If the owner were not party to the sharing arrangements or if the occupants made a fixed contribution to the owner for household costs, there would be a presumption that the payments made by the occupants contained an element of reward to the owner for the occupancy of the residence. Enquiries will be necessary in these cases to establish the extent of the benefit to the owner which should be included in his assessable income. Income tax deductions for losses and outgoings attributable to the residence would be determined on the same basis as applies under the heading "arms length letting of an identified part of a residence, e.g. a bedroom, with access to general living areas of the residence".

If you need more info on the CGT I can forward you a few rulings as well.

Annemarie
AMH Accounting

Hi Joanne76

I was just wondering how all of these "promotional emails" contains the same grammatical errors and spelling mistakes. Do you guys work from a template?

It is also interesting to see the post replies "dry up" when the questions get difficult.

Hope it works out for you.

Anne

Hi Guys

I live in Emerald In Central QLD, in the centre on the Bowen Basin.  Yes, Emerald has boomed and prices has not moved since Nov 2006, but rent are still very strong and demand is not met. Emerald is a Hub Town – population of Approx 18,000 where most miners and other workers buy their own house, after some years of renting. Yes there is a lot of fly in/out workers as well, but people move their families here for the long haul.

I am an accountant here and some months ago one of the mine executives with one of the largest mining companies made the following comment " If people only knew what the mines are planning in the next 5 to 10 years" This mine is currenlty sitting on another 80 to 120 years of coal at current levels of production. If they double the production and don't expand they will still mine for another 50 years. Emerald has an exellent source of water in the Fairbairn dam that supports lot of agriculture, like citrus, cotton, wheat and lots of cattle.

Also look at the following links regarding a new coal mine development in Alpha which could open the Galilee coal basin.

http://www.abc.net.au/local/stories/2008/07/16/2305401.htm?site=westqld

http://www.supplychainreview.com.au/article.cfm?StoryID=35639&SiloID=0

Yes, these are still only in the planning process.

If you have any questions regarding surrounding areas, I will be happy to assist.

Annemarie

Hi Chewy

First of all, you need to establish if your investment property is a residential property or a commercial property. If you just have a residential property (house, flat) that you rent out permanently (not like a holiday rental) you are not deemed to be carrying on a business and if you are not deemed to carry on a business you don't qualify for a ABN. Please refer here to para. 6 "  However, it is not wide enough to cover the letting of a property by itself, which is an activity in the nature of investment rather than a business, or an adventure or concern in the nature of trade.⁹ Therefore, paragraphs (a) and (b) do not need to be considered any further"

You did not mention if you purchased your IP in your own name or say in a Trust Structure – I am just assuming here that it is in you own name. You also did not say if you are involved as a Sole Trader business or are thinking of starting one up as a Sole Trader or in another structure. You also did not metion if the domain name is for the IP or for some other activity. Would be happy to assist if you can supply a bit more info.

Regards
Anne
Chartered Accountant

Hi McNorman
On page 71 of Lance Spicer's book the tax solution it states as follows

"LAND next door……" It is only vacant land not another house and there are conditions for it to be deemed part of your PPOR
1. The land is primarily used for domestic or private purposes in association with the dwelling

2. The land area does not exceed 2 hectares.

When reading this book one has to be very carefull as to the interpretation of the statements – there is a lot of "spin" in there making things sound better than what they are.

I was astounded at how Mr Spicer time and time again says "your accountant says No, but you can." I am an accountant and believe me we all had a good laugh at the spin he puts on things.

Anne

Hi Chris
Thank you for a well formulated economic response. Some of the other "ideas & opinions" discussed here was a bit "out there". Mind you I am not an economist (just an accountant)

Annemarie

Hi Ben

All I want to say is that "people's" opinions can cost you a lot of money. Educate yourself, save your deposit and research in your own backyard. There are very good buys in Robina and Varsity Lakes at the moment but they will still get better in 2009.

Cheers
Annemarie