Hi, I just new in the “real estate” world.
There are some issues that I want to ask.I’ve excess money and I’m thinking to buy a property, and the question that comes up from my brain is:
1. After I bought the property (for investment), say I want to renovate some area like kitchen and toilet. Can I claim the expense that I spend (for the renovation) as a capital loss for my tax deduction ??
2. Say I bought the property on August, and after doing some renovation for 1 month, the property was ready to be rented on September. Say, no-one renting the house for 2 months (until November), and on December, a couple rent the house (so I have the income from December to June next year). In case of negative gearing, when I can claim as a capital loss ?? Is that from August, September or December ??
Thank you, and your answer will be appreciated.
Hi leo
To answer your question you only can only claim a loss when tentants are renting the property. That claim then can be taken to the taxation office when you do your tax. Thus resulting your loss being taken away from your total net income. If you have any questions give me a buzz.
Cheers lenny
Dear Lenny (Deep_Pocket),
Thank you for the info.
So, how about the renovation cost ? Can I still claim it as a tax deduction (provided I have a sufficient income to offset the loss) ?The second point that I want to mention is: during august to november, the tax won’t recognise it as a loss (since the property is still vacant). And I am only be able to claim it as a capital loss when there is a new tenant coming (which is on December (based from my example above)). Is that what you mean ??
Once again, thank you for your advice.
Originally posted by leo777:Hi, I just new in the “real estate” world.
There are some issues that I want to ask.I’ve excess money and I’m thinking to buy a property, and the question that comes up from my brain is:
1. After I bought the property (for investment), say I want to renovate some area like kitchen and toilet. Can I claim the expense that I spend (for the renovation) as a capital loss for my tax deduction ??
NO – you can only claim a CAPITAL LOSS at the time you are factoring in the cost base for a property upon it’s sale.2. Say I bought the property on August, and after doing some renovation for 1 month,
WHAT TYPE OF RENOVATION???
Repairs are not capital losses. This can be ambigious hence exercise caution.
the property was ready to be rented on September. Say, no-one renting the house for 2 months (until November), and on December, a couple rent the house (so I have the income from December to June next year). In case of negative gearing, when I can claim as a capital loss ?? Is that from August, September or December ??
IT IS NOT A CAPITAL LOSS. Even if it were, it also depends of the type/level of works being conducted in determining habitability.As for claiming any loss, your claim would be income/rental loss which, because it was never tenanted in the first place, you can make income (ie. rental) loss claims, but MAY prove difficult to establish. Check with tax accountant for more precise advice on this matter.
TIP: Wherever possible, renovate whilst a property is tenanted, thus making all REPAIRS not CAPITAL IMPROVEMENTS immediately tax deductible (within that financial year of course).
Regardless of all of this, YOU CAN CLAIM interest paid on your negatively geared property during this time (as at any other) as well as any advertising costs incurred for prospecting of tenants.
NOTE: CAPITAL IMPROVEMENTS are factored into cost base for CGT/Loss calculations and as such are NOT immediately tax deductible.
REPAIRS are tax deductible, but can be vague to differentiate between renovations for repair or for capital value adding, hence seek professional tax advice or check with ATO on 13 28 61.
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