Claiming Costs associated with Investing

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From: Lan Diep


Hi All

This may seem like a silly question to all who are experienced with Investing..but since becoming very interested in IP, I have spent a bit of money on books, education etc. Can I claim these expenses at year end, even though I have not yet purchased my first IP?
 
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Reply: 1
From: Anonymous


Hello,

I can only answer you question in relation to my own situation.

All our investments are held in our family trust/company name. As a result any expenses associated with investment education are tax deductable. All the books and manuals, cost of flights and accommodation etc. whilst attending investment seminars interstate and the actual cost of the seminars are all tax decuctable.

I do not know for sure if this applies in other situations.

Regards

Topaz
 
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Reply: 2
From: Duncan M


>This may seem like a silly
>question to all who are
>experienced with
>Investing..but since becoming
>very interested in IP, I have
>spent a bit of money on books,
>education etc. Can I claim
>these expenses at year end,
>even though I have not yet
>purchased my first IP?

The deductions for 'self-education' are limited to those expenses that relate to your current income producing activities.

For example if you're a Plumber and you're doing an Computer Science degree then the costs are not deductible. If however you were doing a course on installing Hot Water Services then the costs would be deductible..

The relevant ATO link is:

http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR989/nat/ato/00001

The relevant text from that link is:

12. Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer's current income-earning activities.
13. If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

14. If the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.

15. No deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Hope this helps.. (seek professional advice as well :))

Duncan.
 
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Reply: 2.1
From: Lan Diep


Hi Duncan

Thanks for that info. From what I understand, because I have not yet brought any property which is generating income, I fall under Point 15 - which basically means I am self-educating myself on a topic which I hope to generate income in the future...

Now I am confused...Does that mean I cannot claim anything until I've brought my first IP?

Lan
 
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Reply: 3
From: Felicity W.


Do you own any shares? You may be able to claim "investment education" in that case.
Keep smiling
Felicity :cool:
 
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Reply: 2.1.1
From: Glenn M


Unfortunately so Lan.

The Australian Taxation Office views such costs as being capital in nature. In other words, you are laying down the foundations to derive income in the future. There is a requirement that costs can only be matched against associated income.

Glenn M.
 
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Reply: 2.1.2
From: Dale Gatherum-Goss


Hi

Actually, that ruling is not tax law. It is merely the ATO's position on the subject. This means that you can ignore it if you believe that the tax office are wrong and have enough gumption to fight the issue - if it ever arises.

Having said that, the ruling relates to self education expenses that are work related not investment related and this may be enough of a distinction to get you through.

As mentioned before, you should discuss this with your own accountant. In doing so, try to give him/her the reasons why these expenses should be deductible and explain how they relate to your income. Accountants are not too bright as a rule and need to be led . . .

I hope that this helps

Dale
 
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Reply: 2.1.2.1
From: Michael G


Dale,

Which state are you in?

Like the commercial..

An accountant that reads investment forums?, I'd like to see that!

Michael
 
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Reply: 2.1.2.1.1
From: Dale Gatherum-Goss


Hi

I'm in Melbourne. I invest and I'm always keen to learn more to help me, my children and my clients.

Dale
 
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Reply: 2.1.2.1.1.1
From: Lan Diep


Hi Dale

Where is Kilsyth?

I live in the outer south eastern suburbs...

Funny..there's alot I still need to learn about IP - and one of them localities :)

Lan
 
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Reply: 3.1
From: Lan Diep


Hi Felicity

I only own managed funds, what do you think? :(

Lan
 
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Reply: 3.1.1
From: Robert Forward


Hi Lan

IMHO

A managed fund can be good for your financial structure so don't fret.

There are 3 different styles of investing that will set you up.

Firstly you need to invest to be "comfortable" so if your other investments fall through or something drastic happens you will still have money to live comfortably on.

I then invest for "security". Of which I mean that I want a good return from this style of investment and it will be the base of making me wealthy.

I also invest in high end stuff that has higher returns to try and "build my wealth" as quickly as possible.

The amounts of time that I spend on each category vary, my "comfortable" investing I don't spend much time on at all. I can make more money by spending my time in my other 2 styles of investing.

So what I'm really saying everyone should have a strategy and adapt it to the times. I know that my comfort level is set, I can't go broke because I've got that setup in place. And that in itself is a big weight off my shoulders. Now I can spend my time, my money, my brain power on bigger returns.

At least you have a base with your managed funds, now you can build on it.

Cheers
Robert

Disclaimer: This is my style and is not for everyone. So I'm not giving anyone advise on how they should invest. Got it.
 
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Reply: 3.1.1.1
From: Owen .


Sensible stuff Robert. More people should be doing the basics first and then they will be freer to take the risks involved in the high return stuff if they want to without risking the farm.
 
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Reply: 3.1.1.1.1
From: Robert Forward


Nice email address there Owen. hehe.

Your right there, a large proportion of people want everything and they want it now. I've found that once you've developed your base then things really start kicking in snow ball.

It's also a good training ground too, start simple and learn, expand your knowledge as you go. Yes some move and expand their horizons faster then others but that is life.

Anyway, that's just another thought/comment from me.

Cheers
Robert
 
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Reply: 3.1.1.1.1.1
From: Lan Diep


Thanks Robert and Owen

I suppose it's hard not to get caught up in all this 'getting wealthy quickly' stuff.

I have been with managed funds for about one year now. I am very interested in purchasing IP, but i know that i must build my foundations, read books, educate myself and talk to people who are successful IP'ers, hence this forum :)

Lab
 
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Reply: 2.1.2.1.1.1.1
From: Dale Gatherum-Goss


HI Lan

Kilsyth is in the outer eastern suburbs too. We're near Montrose. Lilydale, Croydon and Bayswater.

Dale
 
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Reply: 3.1.2
From: Felicity W.


Hi Lan
It will probably depend on how you chose your particular funds as to whether or not you can claim any education expenses.
For example, if you've gone to a financial planner and then followed their recommendations, you can claim any fees you pay them (if any) but that's it.
However if you've chosen your own funds, and subscribed to say Personal Investor and Money magazines, or attended a seminar about funds, then those would probably be claimable.
But I'm not a tax accountant!
Keep smiling
Felicity :cool:
 
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Reply: 3.1.2.1
From: Dale Gatherum-Goss


Hi

Actually, the initial financial planner's fee is not tax deductible in one go, but, written off over the life of the investment. The tax office sees this as a cost of buying an investment and not of holding that investment.

That's a distinction that we should all remember when providing information to our accountants.

Dale
 
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