Are OC special levies tax deductable?

[fluffyrabbit]

Hi all,

The Owners Corp for my investment property have imposed quite a significant special levy. The levy is specifically for legal and court costs that have arisen from suing the original builder for not correcting major building defects satisfactorily while the property was under warranty and for engaging a new builder to complete the work.

I have done a little research on other forums, including this one, and on the ATO website and I'm assuming that I can claim 100% of the levy as a tax deduction because it falls under repairs and maintenance.

Is there anyone out there that can confirm I am right in assuming this?

Thanks in advance for your replies.

 

[Terry_w]

Hi all,

The Owners Corp for my investment property have imposed quite a significant special levy. The levy is specifically for legal and court costs that have arisen from suing the original builder for not correcting major building defects satisfactorily while the property was under warranty and for engaging a new builder to complete the work.

I have done a little research on other forums, including this one, and on the ATO website and I'm assuming that I can claim 100% of the levy as a tax deduction because it falls under repairs and maintenance.

Is there anyone out there that can confirm I am right in assuming this?

Thanks in advance for your replies.

Sounds like a capital cost - relating to the building works.

 

[fluffyrabbit]

Hi Terryw,

Thanks for the reply.

I'm a bit confused. I thought capital works related to making improvements to the building in some way. The work is essential repairs after a major storm a couple of years ago caused major leaks throughout the entire building. The work is to replace parts of the plumbing and restore balconies to the original condition.

If it does fall under capital works does that mean I can only claim 2.5% over 40 years? Can I include the legal costs as part of the claim or just the building repair portion?

 

[depreciator]

Now I'm confused.

In your first post you said the special levy was for:

...specifically for legal and court costs...

So was the money used for legal expenses, or was it used for building works?

 

[fluffyrabbit]

The levy covers the legal costs to take the original builder to court and for a new builder to fix it up.

 

[Paul@PFI]

Tax Deductions

Special levies are generally capital related and made for major capital works or legals etc. They arent tax deductble. Ever. But they should be considered as they may result in a Div43 Capital Works issue which will be written off over time.

The ATO rental Guide used to clearly mention this but once again its hard to find...

Paul
www.pricefiancial.com.au

 

[Paul@PFI]

No. A special levy isnt capital work expnditure. You cant trace its nature and intended end spend and apply that to your tax situation. Only the OC can spend that. You can get a depreciation schedule though.

Paul
www.pricefinancial.com.au

Hi Terryw,

Thanks for the reply.

I'm a bit confused. I thought capital works related to making improvements to the building in some way. The work is essential repairs after a major storm a couple of years ago caused major leaks throughout the entire building. The work is to replace parts of the plumbing and restore balconies to the original condition.

If it does fall under capital works does that mean I can only claim 2.5% over 40 years? Can I include the legal costs as part of the claim or just the building repair portion?