Forum Replies Created
Hi Catalyst,
I’m not sure of the rules elsewhere, but here in WA… prospective buyers (accompanied by the owners agent) do have the right to “reasonable access”. If I flatly refuse access, with no good reason, a magistrate will order I provide access for say, 1 hour every tuesday afternoon or something.
Certainly they have to ask me before they show anyone through the property, I do have the right to deny it, without providing a reason. But I wouldnt get away with it for long, they’d have me before the magistrate pretty quick.
As an accountant, I operate a home office. I frequently take client’s work home and at any given time, I have client’s confidential financial information in my office. It’s beyond my understanding as to how I can be forced to provide public access. Were anything to be stolen, I would not be covered by insurance because I have given access. Personally I think its completely unreasonable for anyone to expect me to be present, at any given time, to guard my office from prying eyes.
Being forced to provide public access to our house is a flagrant violation of our privacy. If the property had been listed prior to our application, or we had been aware of the owners intention to sell, we most certainly would not have signed the agreement.
I’m hoping the magistrate will see my offer to mutually terminate the tenancy agreement as a generous offer. Considering it would involve me footing the bill for removal costs twice in 2 months, it certainly feels generous from my end.
Thats my rant for today.. thanks for your thoughts – keep ’em coming!
Thanks Scott No Mates,
Not the same agency, cant proove it, and about 4 weeks.
IMO, it doesnt matter whether the agent knew, they are after all, just the owner’s agent, making a contract on the owner’s behalf. If the owner knew and the agent didnt, that’s “innocent misrepresentation”… enough to rescind a contract.
Your negative taxable income does accrue, so if your away for 3 years, and your taxable income is -$4k a year. Then in the year you return your first (3years x $4k) + $15k = $27k taxable income will be tax free..
sorry catalyst, I hate to contradict you, but he is definitely entitled to claim a deduction for interest, rates, land tax, insurance and water charges, despite the property not being available to rent during the financial year.
I dont expect you to take my word for it.. so I’ll refer you to Ormiston’s Case:
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/AATA/2005/978.html?stem=0&synonyms=0&query=ormistonIn short, the property is bought with the intention to rent, however extensive renovations are required to bring the property to a rentable state. The property is not available to rent, yet the judge finds that the above costs are deductible under s 8-1 of the Income Tax Assessment Act 1997
ormiston’s case transcript wrote:summary: INCOME TAX – property purchased for rental purposes – renovation over five years – property not available for rent – expenditure on interest, annual charges and repairs – whether allowable deductions – whether connection between expenditure and prospective income.ormiston’s case transcript wrote:4. Mr Ormiston said that he decided to purchase an investment property in early 1998 as a long term investment to provide rental income and increase in value.ormiston’s case transcript wrote:5. Mr Ormiston said that, shortly after taking possession of the investment property he arranged an inspection by two local real estate agents for their estimate of the potential rental. Both estimated a rental of between $220 and $260 per week with an increase of approximately $50 per week if some “cosmetic improvements” were made. He said that he decided to undertake some improvements prior to letting the investment property. As he had developed skills in renovating his own residence he sought to do most of the work himself. Initially, he expected the work to take up to twelve months but felt that the delay was warranted to obtain a higher rental and a better class of tenant.ormiston’s case transcript wrote:6.Mr Ormiston said that, soon after commencing work on the investment property, he decided that it would be prudent to restump the house. This delayed work on other areas of the investment property and resulted in more work and time than initially contemplated in repairing lath and plaster internal walls and external walls. Initially he worked on the investment property most weekends and some evenings. He accepted that he had not properly scheduled the amount of work and time required.ormiston’s case transcript wrote:8.As a result of legal action following the end of the de-facto relationship, Mr Ormiston said that it was necessary to sell the investment property to free the residence, now occupied by his former de-facto partner, from the security of the loan and to rationalise their joint affairs. The investment property was sold in August 2003. The work commenced by Mr Ormiston was still incomplete but he understood that the purchasers were able to complete the renovations and move into the house within five to six weeks of settlement. In the nearly five years of his ownership, the investment property had remained unoccupied.And the important bit….
ormiston’s case transcript wrote:13. On balance, I am prepared to accept the evidence of Mr Ormiston that his intention at the time of purchase of the investment property and thereafter until shortly before the sale, was to derive long term rental from the investment property. Consequently, I am prepared to accept, also, that his initial expectation was to have the investment property available for rental after modest renovations within a maximum of two years. The delay was caused by his inexperience, lack of proper planning and problems in his personal life.
14. As such, the interest on funds borrowed should be an allowable deduction under s 8-1 of the Income Tax Assessment Act 1997 (“the Act”) on the authority of Steele’s case. It follows, also, that other necessary recurring expenditure of rates, land tax, insurance and water charges were deductible under s 8-1 of the Act.Hi Shwing
Your right on all counts..
you can claim interest, rates, borrowing costs & depreciation.
you cant claim the costs of repairs, however you can depreciate those costs which would be considered to be an improvement. Discerning between repairs and improvements can be tricky.. the ato website will be helpful there (believe it or not!)
Good luck!
I understand what you mean about keeping the tenants happy.. good tenants are hard to find!
Paint is a tricky one.. According to the ATO the answer is “no”, because you painted before the property was rented.
That said, if the painting was only part of a range of activities which you carried out, and said activites could be seen to have increased the income producing abilities of the property, then you could group it all together and call it a “renovation”. Problem is, its “almost” pointless, because it has to be claimed over 40 years.
Plummer wrote:I have 3 credit cards with $30k available of which I owe about $14k. Now, with this extra $4k that I am going to pull out, am I able to claim the interest back on this at tax time?yes but its not as easy as it might seem at face value and your accountant wont be happy about it.. you’ll end up paying
Plummer wrote:If the answer is yes then I pose this further question. As I have used about $50k cash to complete this deal am I able to say that I pulled this from my full personal debt (i.e. $18k) from credit cards and then claim the interest charged on the $18k at Tax time?Thanks everyone
Plummer
no you cant “say” that you did it, you have to actually do it. Its easy to say in hindsight I realise, but you should’ve used the cash to pay out the cards and the finance to pay for the deal.
The antennae is claimable…
as are any renovations you’ve done prior to the property being rented, its just that they need to be depreciated rather than claimed in full in the year of expense.
But you dont need to depreciate the antennae. That said, I have no idea why, but they’re usually considered to be owned by the tenant, ie: the tennant buys it, installs it, and takes it when they leave. what does your property manager say?
Heheh.. obviously the proper answer to that is:
“no its not legal”but if I wasn’t me I’d say:
No its not legal to ask them, but if they do it then it’s a legal document (or will appear so anyway).That said.. if its an improvement then the date wont matter so much because the cost will be depreciated during the time the property is rented anyway. So your better off getting them to change “repairs to hot water system” on their invoice to “install new pipe/ valve/ tap” whatever. The latter can be depreciated, the prior needs to be claimed on the date of the invoice.
If its a repair then as you can imagine, a $1000 repair bill, 2 weeks after the property is first rented might look a bit suss. So I guess it depends a bit on how much the repair bill is, and how far forward the tradie is willing to put the date.
good luck!
No evidence is required, you do not need to have mail sent to that address whilst it is a rental in order to claim the 6 year PPOR exemption extension.
To claim the extension, you simply elect to do so when the CGT event occurs, and prepare your capital gain calcs accordingly.
There’s some really good info here:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htmcataldop wrote:Thanks Mr 5o1,My estimated CGT bill is $20 – $25K and based on the feedback I have recieved so far I'm not sure I can pay my tax bill from the LOC because based on what I have read in the past the ATO does not really consider property investing a business unless it is a persons main source of income.
sorry.. i didnt explain very well,
even if you could satisfy the criteria for being “in business” (there’s a number, none of which definitive on its own), its exceedingly likely that you wouldnt want to, given that the disadvantages would outweigh the advantage of the tax deductibility of interest on $25k.
My advice.. cop it on the chin.
aque wrote:I assume stuff I bought years can still be depned if I employ a`quantity surveyor.Yes it can. But the schedule they provide you with will include the depreciation on any additions of your own.
ie: if you install a hot water system today, and a QS goes through tomorrow, the QS depn schedule will include depreciation on the HWS. of course, if a QS goes through today, and you install the HWS tomorrow, then you will have to depreciate that HWS in addition to the amounts claimable per your QS schedule.
Q1. Yes.
Q2.
It can be depreciated also. if you buy a capital item ($1000) and install it today 9/8/10, live in the property until 9/11/10, and then rent it. Your depn for 2011 would be:
Using DimVal method, 8yrs useful life.
deductible portion 2011 = portion rented * 1st year depn = (234days / 326days) * ($1000 * 25%) = $160
deductible portion 2012 = ($940 * 25%) = $235
and so on…But thats only capital items, any expenditure which is considered to be repairs or maintenance before the property is initially rented is not tax deductible.
Hope that helps!
I agree with Dan, the “home first used to produce income rule” does not apply, nor does the 6 year ppor extension. so its 10/13ths of the total gain.
Hi cataldop,
Matt’s right.. if your considered to be in business (more disadvantages than advantages IMO) then you could claim the interest, provided the money you borrow to pay it is indeed from your LOC, and not a separate loan.
CCH Master Tax Guide 16-856:
It has generally been accepted that interest on a loan taken out to pay personal income tax is not deductible under ITAA97 s 8-1 (eg Case V48 88 ATC 380). However, where a business taxpayer uses an overdraft to pay income tax or pays the tax out of a larger loan taken out to meet general business expenses, the ATO will not disallow that part of the interest on the overdraft or loan that is attributable to the payment of tax. Further, the Commissioner accepts that, where a business taxpayer borrows money to pay income tax, the interest incurred on those borrowings is deductible provided the borrowings are connected with the carrying on of the business (Taxation Ruling IT 2582; see also Case 14/98 98 ATC 201). This also applies to a sole trader (ID 2006/269). Partners are not entitled to a deduction for interest on borrowings to pay personal income tax (Taxation Determination TD 2000/24).jhjw wrote:for CGT purposes are we better off moving to property 1 and using it as our PPOR and renting out property 2 and then moving back to property 2 while we're building property 1?Are we still liable for CGT for the 2 months that the tenants are living in property 1 after settlement anyway?
Am very confused and would appreciate any advice.
Best regards,
J
In short yes and yes.. sorry I dont have time for a more complete answer right now, look up “home first used to produce income rule” on the ato website. not to be dramatic… but if there’s tenants in there in settlement date, then that fact alone will cost you more in CGT than the tenants will pay in rent for a year ( + your negative gearing advantage)..
will give you more info tomorrow!!
e-tax has changed slightly, There are 26 new items in the Individual form this year.. say hello to simplified income tax!
your spot on in that the income tests are probably the most relevant to you.. yes the “formulas” have changed. but not to any great extent.. the most likely change would be that your rental losses are now included in your “Income for medicare levy surcharge”.. meaning that if your combined taxable income, plus rental losses, is > $150k for yourself and your partner, then you’ll be liable for the MCLS (1% of your “income for medicare levy surcharge”) 1% certainly isn’t enough for you to feel “terribly shocked” .. but I’m just trying to explain the interaction of the income tests in your tax return.
As terry pointed out.. tax rates have dropped mildly, but once again, not enough for you to feel “terribly shocked”.
please please dont take this the wrong way.. but there’s any number of things you could input incorrectly in the tax form, which would drasticly effect the result, without throwing an error.
Of course, if you’ve submitted a PAYG variation then none of this applies.
The only way to find the problem.. is to compare this years tax form to last years.. I’d start with:
-compare the total expenditure (not the loss.. just the expenses) on each rental with the prior year
-then compare net rental loss from this year to last year
-compare your income from non-rental sources with the prior year (less income will mean less refund)
-then deductions against non-rental income sourcesIf that does not show up the difference then go through the entire form start to finish and list the items which have considerable differences to last year. The problem / difference is in there somewhere.
I hope this helps.. Let us know how you go..
thats right.. currently, your not liable for the MC Levy Surcharge till your income is > $75k as an individual or joint income > $150k as a couple. in `08 and before the thresholds were $50k and $100k respectively.
Medicare Levy is a different storty, but the $560 amount looks like MCLS.
Hi Not so lucky..
In your case it will make absolutely no difference to the results of your tax return. Joint income is used for only a few calculations, medicare levy surcharge being one of them, but your both under the threshold for that whether you lodge as individuals or defacto.
You will need to get market value appraisals as at the date you moved out (back dated appraisals are fine) That value will be the cost base for your capital gain calculation. (sale price less market value when you moved out, will be total capital gain) You will be elligible for the 50% discount. a pro-rata (time based) calculation is not available in this case.
