existing garage conversion granny flat

Discussion in 'Accounting and Tax' started by jsoe, 1st Oct, 2012.

  1. jsoe

    jsoe curious and keen to learn

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    hi guys,
    I've read a few threads but my situation is slightly different.
    There's an existing garage and shed that we're planning to turn into a two bed 1 bathroom granny flat. We're living in the main house now. Since, we're using the existing structure, roof, etc. we're getting my brother to help build it and us helping out. Brother is not a licensed builder yet.

    My question is when we pay him $10k for his services, how would he invoice us and would that be part of capital cost / tax deduction?
    We'll buy materials ourselves. Will these form part of capital cost or will be able to get tax deduction?

    Thanks,
    Junie
     
  2. Scott No Mates

    Scott No Mates ...and people wonder why?

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    1 Does the work need a da/cc?
    2 Does the total value of the work exceed the threshold for home warranty insurance?
    3 Why can't you take out an owner builder permit?
    4 If your brother isn't registered for gst he can provide an invoice for works but not being licenced may cause other issues.
    5 Is the ceiling height over 2.4m in the proposed living areas?
     
  3. jsoe

    jsoe curious and keen to learn

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    1. Yes, it needs DA permission as the side is closer than 900mm from the boundary.

    2. Don't know. I have to check. Does it matter? I have no idea. :confused: the total build cost + labour would be around $25k.

    3. My brother is not the owners. My husband and I own the place. Sorry about the confusion.

    4. My brother's still studying his carpentry course, but yeah, not yet licensed.

    5. We have an architect drawn up plans for DA application. Ceiling height meets minimum required standard.

    Thanks.
     
  4. brazen

    brazen Member

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  5. jsoe

    jsoe curious and keen to learn

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    HI Brazan, I've replied to you in your other thread.

    Meanwhile, could someone please share some thoughts on (tax implications) using a builder that's not a licensed builder - my original question. My intention is to give my brother about $10k for labour. Can I claim it back at tax time?
     
  6. vaughan

    vaughan Member

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    If you're not using a licensed builder then you need to get an owner builders license.

    http://www.fairtrading.nsw.gov.au/T...and_renovating/Becoming_an_owner_builder.html

    Note that it is an offence under the Home Building Act (maximum penalty $22,000) for the holder of an owner-builder permit to knowingly engage an unlicensed contractor. :(

    Labour for construction is a capital cost, so you cannot "claim it back at tax time" irrespective of whether the person is licensed or not. It becomes part of the construction cost and must be depreciated over 40 years (ie, 2.5% pa) so for $10,000 costs you can claim $250 back in the first year.
     
    Last edited: 15th Oct, 2012
  7. brazen

    brazen Member

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    If you're talking about a conversion, anyone can do this work- just need to list it (on the Application Form) as being $5,000 or less. That's what I'd do to be honest. You must use a licensed electrician and plumber for those works though.
     
  8. jsoe

    jsoe curious and keen to learn

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    Thanks Brazan, We're already put the total reno cost including materials as $25k. Hasn't specified the builder though. But I've noted your comment below for next project.
    DA is in progress and the council is already assessing it too.