I have a question re a vacant lot of land I own. I owned it before I was married for a few years, and it was my only property. I then got married, and we bought a house which is our PPOR In my husband's name. i.e so for about 5 years we have owned a vacant lot and our PPOR. The land is in my name. Because I was intending on building a home on the land, I never claimed anything from it as a negatively geared property in my yearly tax returns. I have now decided to sell it, vacant as i bought it. Am I able to claim back all the years worth of bank repayments/interest paid and council fees etc I have made as a loss until now (as it made no income as its been sitting vacant? I suppose it means putting in amendment for my last 5-8 years tax returns. Is this possible at all? IS there a limit for how far back you can claim if its possible at all? Many thanks
If it was not income generating, then there is no point submitting an amended tax return for those years. What you can do now is offset all of the holding costs against the sale price ie selling price less (purchase, stamp duty, rates, land tax, insurance, grass cutting etc). This may reduce the amount that you are to pay for capital gains tax or give you a capital loss (which can be offset against any other capital gain).
Thankyou Scott. I see what you mean, but I was thinking that I may be able to claim the losses each year (in my usual income tax return which was prepared for my day job) somehow? Would it have reduced my taxable income if I made a loss of 10K on the vacant land each year? Thats more the point of what I was hoping to claim. I'm not sure if the system works that way as you said, when I made no income fromt he actual property itself?
You can only amend tax returns for up to 4 years I think. Better check with an accountant on claiming the costs – may be able to claim against income if you intended to build an investment property, or maybe off the CGT. Not sure.
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l_b29265 wrote:Thankyou Scott. I see what you mean, but I was thinking that I may be able to claim the losses each year (in my usual income tax return which was prepared for my day job) somehow? Would it have reduced my taxable income if I made a loss of 10K on the vacant land each year? Thats more the point of what I was hoping to claim. I'm not sure if the system works that way as you said, when I made no income fromt he actual property itself?No you can't do this . You have to have a direct nexus(connection) with the property that produces income.
What you are thinking of is when the expenses are greater than the property's rental income and you make a net property income loss that can be offset against other income such as a wage from a job each tax year.What also is a rule is you cannot double dip
So if you had been claiming expenses against rental property income you cannot then try and claim these expenses against the cost base for capital gain purposes.
However you have not claimed against income and can add the holding costs onto the property to reduce you capital gain.see the third element of cost base at this web site
http://www.ato.gov.au/individuals/content.asp?doc=/content/36557.htm&page=2&H2
and also the point ofYou do not include costs if you: (direct quote from ATO)
see end of second element part for double dipping
see this example as it is similar to your situation.
http://www.ato.gov.au/individuals/content.asp?doc=/content/36902.htm&pc=001/002/026/017/004&mnu=&mfp=&st=&cy=1
if you make a capital loss you can only claim this against other capital gains now or later on .
(not sure on how long you can carry the loss to future tax return years)Check if you can claim a capital loss while adding 8 years of holding costs to the third element of the cost base with your accountant
Thankyou everyone. Yes I checked the ATO website and its a similar example. Very helpful.
A capital loss can be carried forward forever under the current law.
But yes, the outgoings on an asset that doesn't generate income become part of the "cost base" of the asset. Therefore there is no negative gearing allowed.
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