Bought ip and renovated prior to having it tenanted. Bye bye majority of $40k worth of deductions over the next number of years.
Can you (or someone) explain the main lesson here ?
What type of things was the $40K spent on ?
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Bought ip and renovated prior to having it tenanted. Bye bye majority of $40k worth of deductions over the next number of years.
Bought ip and renovated prior to having it tenanted. Bye bye majority of $40k worth of deductions over the next number of years.
Tonibell ... Lesson is do not renovate prior to the property being tenanted. The majority of the money spent is non tax deductible because it is classed as improvements and not repairs in the eyes of the ato .
Tonibell ... Lesson is do not renovate prior to the property being tenanted. The majority of the money spent is non tax deductible because it is classed as improvements and not repairs in the eyes of the ato .
Im finding this thread quite interesting.
In some cases I am failing to see how some of the posts are considered "regrets" - or Mistakes?
I have always taken the view that you always make the right decision at the time, otherwise, you wouldnt have made that decision. Certainly, with 100% hindsight, you might have made a different decision - however, you now have more information now, then what you did at the time.
When people make a profit on the sale of an asset - even though the future value was higher. I dont consider it a mistake by any stretch. You invested, you made a profit = success? No?
Anyway as I mentioned my investment career has been scared with "mistakes" though I have learnt from each one.
1) I had secured a property at $204k 'subject to finance'. I then got cold feet and got the bank to decline finance. The property a short time later was worth double, and now would be worth 3-4x that much. Regret? no. I was 24 and already had one IP. I would have struggled to pay the deposit and SD, and if it wasnt quickly rented I would have been in all sorts of trouble. I got cold feet bacause I knew I was stretching myself too far. However, my research was spot on. This WAS a good investment - if only I had a bit more up the sleeve - which I didnt.
2) Purchased a vacant block to build my PPOR. Shortly after was the GFC and the market crashed. At the same time I moved overseas, so didnt build my home. I still own the block, and it still isnt worth what I paid for it. Admitedly I purchased poorly as I failed to do adaquate research as this wasnt an investment it was a PPOR so it was an emotional purchase more than a calculated purchase. I will still build my PPOR on it (one day).
3) Purchased a development site which didnt make me a dime. Read my complete thread in my signature panel. I could rattle off a long list of mistakes I had made. Though Im not sure I regret any of it. The learning from this 'failure' will serve me well going forward.
Given my salary level I should be well ahead (financially) of where I am - however, I have invested a lot in my own education, invested a lot in 'unrecognisable' learning (such as international travel), invested a lot in 'life'. Im now comfortable that no matter what happens I wont get to an old age and think "you know, I regret not taking the oportunity to open my eyes to something new instead of endlessly persuing another $". I think the $$ will come, as will the comfort that $$ provide. I have worked hard all my life, but I have enjoyed every moment, and really, have no regrets. I wouldnt be where I am today if I hadnt made any mistakes.
Im sure there are more, but its enough divel from me for one day.
Blacky
If u read the ato site, it is clear that property must be "available to rent". Because i renovated prior to the property being tenanted, any cost incurred is not claimable as a repair deduction and a lot of the cost will form part of the capital base for calculating capital gains. Of course there are costs i can depreciate over time but not the whole lot.
Ie : i didnt just repair the kitchen, it ws ripped out and new one installed (the previous kitchen was a shell and not liveable in the condition it was in) which was just under $10k. This is classed as an improvement and not a repair. I can depreciate appliances but not the cost of installing the kitchen.
Same goes with the bathroom. Please note that i will still claim depreciation on what i can. It was just disappointing i couldnt claim more as a repair expense immediately.
Hard to convince ato if i got audited that the flooring had to be replaced or something was broken if the property had never been rented.
My next purchase will be something that either is currently tenanted or i will buy something and stick a tenant in first before any renovation. At least then i might be able to claim more expenses as a repair instead of an improvement. I will also treat the reno differently too.
Hope this makes sense
A repair would be fixing a broken oven - a new oven would be an improvement.b