Depreciation plus account queries

[Squidman]

Hi,

Reading another thread here got me thinking about my situation.

I have paid Depreciators to prepare a scrapping report and depreciation schedule with their new service which saves a lot as it requires me to take photos and notes and email them in instead of them physically visiting the property.

I will get the tax deduction for that fee this tax return but I'm wondering if I need to rush in (we don't get keys till August 1st) before July 1st and take photos so the report is ready this financial year? Would doing this save me waiting a year for the first tax benefits to be seen?

Also, I have a strictly investment related Line of credit which is partially drawn to supply deposit, fees, reno expenses, insurance etc for investment property. Once renovated and tenanted should rent income go into this account or does this dilute the tax deductions of the borrowings in this account? Which account ideally should it go to if not? The interest only fixed loan investment account for example.

Probably a silly question but can't find the answer easily - do I pay tax on rental income when negatively geared?

Thanks in advance.

 

[Rixter]

Probably a silly question but can't find the answer easily

.

What did your tax professional advise you? That's the only advice you should consider.

 

[Paul@PFI]

Squidman - The depn report gives value. Get it soon - July maybe take pics b4 tenants arrive after you get keys. The deduction doesnt start until you own the property so no reason to buy QS report today. You cant claim the cost until next year.

Dont credit rent to the loan !! If you really want to do this to min interest then use an offset. Never credit money to the loan other than loan repayments.

Do you pay tax on rental income...Yes. You also get to claim deductions like rates, repairs, strata, interest on loan etc. If these exceed the rent then regardless of whether you paid cash for the outgoings you end up with a loss. (eg non cash deductions like depn and cap allowances). So a +v cashflow can still = neg gearing. That loss reduces taxable income (eg salary etc). So your final tax is assessed on net income. So assuming your employer deducted exactly correct tax then the ATO will refund the tax on the loss. You just worked that out now and you already own a property ??

 

[depreciator]

So you don't get the property till next financial year? If you're not going to do an income tax variation, there is no point rushing to do a Dep Schedule.
Scott

 

[Squidman]

Thanks for good advice. We don't settle till August 1st - so next financial year. We are renovating first so are getting a scrapping report done and then a new depreciation schedule once renovated. Won't rush on the photos for Depreciators - I can do it on the day I get the keys before we start ripping out carpet etc.

So ok to have rent deposited into LOC but definitely not into the primary investment loan?

 

[Paul@PFI]

Dont deposit rent into ANY loan. The only credits to a loan should be a repayment.

 

[Squidman]

You just worked that out now and you already own a property ??[/QUOTE]

Thanks, aware of all of these tax deductions just not the simple fact of whether the rent is actually taxed as income. We haven't settled yet and all of this will be sorted with my accountant beforehand. Just didn't want to push for too many answers via email as it become unfair on him. Hence, using this excellent forum...

 

[depreciator]

If you start tossing out stuff as soon as you get the keys, the ATO aren't keen on you claiming the value of the stuff you toss out - I got a Private Ruling on that scenario a couple of years ago. They want you to get a tenant in there for a few months first. Can you just give the place a clean and get someone in there for a while?

 

[Paul@PFI]

Scrapping items isnt deductible at time of moving in etc. It just lowers the cost base. Its a bit like throwing $20 notes at a fireplace. Its the opposite of initial repairs.

LOL - You could also damage your own unit and claim repairs ?