Maintenance?

From: Geoff Whitfield


I've been talking to my accountant about the property I'm going to settle on shortly.

There's 3 units under one title. The vendor lived in one; that will become vacant.

I would like the grounds in good state before showing off to tenants- that's no problems with the vendor.

But the accountant tells me that if I spend on the grounds before I get a tenant in the one unit, costs will be depreciable, because they are improvements. If the same gets spent with a tenant, it's improvements, and therefore not depreciable.

I'd like to get the grounds in a good state before tenants look at the place- but the deductions up front would be most welcome.

Any thoughts please?
 
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Reply: 1
From: Dale Gatherum-Goss


Hi Geoff!

I'm afraid that you're accountant is right and that the gardening is not a tax deduction in these circumstances.

By the way, did you ask your accountant how it might be deductible? That is, under what circumstances it might become deductible?

Just a cheeky thought.

Dale
 
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Reply: 1.1
From: Duncan M


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Dale,

Under what circumstances might the gardening become deductible?

Regards,

Dorothy Dix.

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Dale,


Under what circumstances might the gardening become deductible?


Regards,


Dorothy Dix.




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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Duncan

You're not cross dressing again on this list are you, Dorothy?

Seriously, that's a great question.

If the vendor is prepared to provide you with an invoice for the gardening works that says something like:

"For cleaning and preparing the property in readiness for tenants"

then the cost should be tax deductible. You just pay the vendor and not the local nursery or anyone else.

Of course, you can now apply the same principles if you hire anyone else to do the work for you.

I guess the bottom line is your own moral or ethical position . . . and that's another question altogether!

Have fun

Dale
 
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Reply: 1.1.1.1
From: Robert Forward


Hi Dale

I'm in the same position here with doing a garden in a new property.

If I spend $10k on the garden and instead of claiming depreciation (which I don't want to cause of the strategy I'm using on this property). Can it then be offset against the Capital Gains for when it's sold?

PS: The strategy is to do a reno, gain the equity in the property, sell to my company at a very high price with "Vendor paying all costs" and carry say 40% of the finance personally for the company. So as you can see I am wanting to lower my CGT on this as I could in effect be hit with a high 5 figure tax bill.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi Robert!

Yes, you most certainly can offset this costs against your Capital Gain and thus reduce your tax.

Good luck

Dale
 
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Reply: 1.1.1.1.1.1
From: Robert Forward


Thought so.

Just needed clarification.


Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1.1.2
From: Duncan M


Thanks Dale,

I'm a little confused..

The ATO's Rental Property guide discusses on Page 14 the Story of the
Johnsons who acquired a property but then paid an Interior Decorator to tart
things up a bit.. the conclusion in the guide being:

"These expenses were incurred to make the property suitable for
rental and did not arise from the Johnsons’ use of the property
to generate assessable rental income. The expenses are
considered to be capital in nature. Therefore, the Johnsons are
not able to claim a deduction for these expenses."

Would an invoice that suggested the tidying up of the garden was to repair
damage caused in the period between the exchange of contracts and settlement
be a more effective invoice?

Regards,

Duncan.
 
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Reply: 1.1.1.2.1
From: Dale Gatherum-Goss


Hi

Yes, you could. Furthermore, don't take the ATO guide as gospel as often there are minor distinctions that allow decisions to go one way over another.

Have fun

Dale
 
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Sim

Administrator
Reply: 1.1.1.2.1.1
From: Sim' Hampel


On 3/1/02 1:16:00 PM, Dale Gatherum-Goss wrote:
>
>don't take the ATO guide as gospel

You could have mentioned this bit to us ages ago Dale... would have saved lots of confusion and arguments ;-)

My recent enlightenment on the true nature of the thought processes inside the ATO just make me feel even more glad I chose I.T. and NOT accounting.

So I think the advice is, read the ATO guide to get a feel for what the ATO would like you to do, but then go to a good accountant and let them direct you in how to best work the system, right ?

sim.gif
 
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Reply: 1.1.1.3
From: Geoff Whitfield


Thank you Dale and all contributors.

'Invoice "For cleaning and preparing the property in readiness for tenants" then the cost should be tax deductible'

Isn't that an extremely fine line? Might that be questioned?



"Would an invoice that suggested the tidying up of the garden was to repair
damage caused in the period between the exchange of contracts and settlement
be a more effective invoice?"

Another fine line? All those weeds grew between exchange and settlement?



The accountant has mentioned that even repairing damage caused by a bad tenant is capital in nature- if it's repaired while a property is vacant. About one sentence away from "lunacy of the tax office". This applies even if two out of three dwellings are occupied at the time of the "improvements".


I suspect that I will go for a trim- the full cut, perm and blow dry to be done after tenants move in.

Thanks for the help people.

Geoff
 
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Reply: 1.1.1.3.1
From: Dale Gatherum-Goss


Hi Geoff!

Yes, it is a fine line. However, even legitimate invoicing can be questioned.

I'm happy enough with both approached and have no problem arguing that the weeds grew between contracts being exchanged and the settlement.

And, with all due respect to your accountant . . . "The accountant has mentioned that even repairing damage caused by a bad tenant is capital in nature- if it's repaired while a property is vacant."

Is absolute rubbish!!!!

Dale
Still shaking his head in absolute disbelief!
 
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Reply: 1.1.1.2.1.1.1
From: Dale Gatherum-Goss


Hi Sim!

You wrote: "So I think the advice is, read the ATO guide to get a feel for what the ATO would like you to do, but then go to a good accountant and let them direct you in how to best work the system, right ?"

Yes, this is right. The tax office interpret the laws just as we do. This interpretation does not make their stance any more right than yours or mine. They just have bigger sticks to back up their thinking!!!

Have fun

Dale
 
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Reply: 1.1.1.3.1.1
From: Jerry Maguire


hi to everyone
i done up my garden front and back including replacing of the fencing from wood to colourbond and the back pagola on one of my ip and it cost me about 15K.
i've got about an extra 80K extra equity from the new valuation it sure is a tax deduction cos i'll be claiming for my money and my accountant says no problem as long as you get yourself a good accountant who knows what the hell he's doing so you will have got no problems then onwards...
 
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Reply: 1.1.1.3.1.1.1
From: Duncan M


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>and my accountant says no problem as long as you get
>yourself a good accountant who knows what the hell
>he's doing so you will have got no problems then onwards

Yeehaa!, just strap ya spurs on and deduct away then?


Duncan.



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>and my accountant says no problem as long as you get
>yourself a good accountant who knows what the hell
>he's doing so you will have got no problems then onwards


Yeehaa!, just strap ya spurs on and deduct away then?



Duncan.





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Reply: 1.1.1.3.1.1.1.1
From: Michael Croft


HI Jerry,

I strongly recommend you read your accountants disclaimer, which you agree to and sign off on by the way. It basically says "I accept no responsibility for this tax return because my client supplied all the information on which I based my calculations" - the buck stops with you if the ATO comes knocking on your door.

Michael Croft
 
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Reply: 1.1.1.3.1.1.1.1.1
From: Jerry Maguire


reply to what you guys was saying i've been claiming on those depreciation for the last 5 yrs and my accountant is doing the same thing himself as well.
put it this way guys it took me ages to find this accountant and who is doing it himself as well and he has got more than 20ip so would i be so stupid to go to someone who is not doing the ip thing???
and if an accountant who is not doing it himself or has less than 10 ip i wouldn't even go to him at all guys.
if you want to be a successful ip investor you just have to ask the Q the more Q you ask the more Q you will know what to ask the next accountant to get the right answer off them and the answer will be reveal to you and if you ask enough accountant you know what i say is truth but sometimes you might not find the right ppl to work for you you just got to keep knocking on doors and find the right one there.
i know a few ppl in here still says that their accountant is shit but hey you just got to keep looking no point blaming them cos they are pack of pricks doesn't mean that you are cos you couldn't find them and stop saying my accountant is shit or whatever again cos all of us in this room knows that they are shit anyway
hey i'm not F in the head i ask the right Q to find the right accountant and not just one off the street at the cross...
i know everyone here is this forum got the right to have their own opinion cos they have the right to do so it is a free country and opinion is just like an arsehole everyone have it...
so come on guys go right ahead...
can't wait for the next arsehole to come up oh i meant opinion...
 
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Reply: 1.1.1.3.1.1.1.1.1.1
From: Duncan M


Jerry,

Have you always been this foul mouthed? Or is it a recent thing?

Regards,

Duncan.
 
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