Property Courses that are tax deductable

[marks]

I have a few questions which came about on advice what was deductible and what was not. Generally, I have rental properties and this info was relevant to that.

An expense is generally allowed as a tax deduction if it is incurred in generating income - in this case rental income. Also, timing is important if the expense is to be deductible. The expense has to be incurred after you own the property ? usually after settlement.
According to ATO regulations,
- If the program relates to increasing wealth ? no deduction
- If the program relates to acquiring/sourcing property ? no deduction
- If the program relates to improving the value of a property ? no deduction
- If the program relates to improving rental revenue ? yes deductible
- If the program relates to reducing rental expenses ? yes deductible
- If the program relates to getting better tenants ? yes deductible
- If the program relates to better managing the agent ? yes deductible


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I always thought the test was it had to be related to your occupation. ie. A hairdresser could claim on a hairdressing training course but not a accountancy course, even if they are planning on changing occupation.

Appreciate your thoughts on this. When is a course or training deductible for you. When has your agent or ATO declined it.
How would the range of property courses in the market be tax deductible?

Cheers.

 

[alexlee]

I always thought the test was it had to be related to your occupation. ie. A hairdresser could claim on a hairdressing training course but not a accountancy course, even if they are planning on changing occupation.

The test is related to whether it's incurred in generating income. Employment is one form of income, so courses related to your (income-generating) employment are generally tax deductible. Other forms of income are rent, interest, business income.

If the hairdresser in your example ran their own shop, then an accountancy / book keeping course may well be deductible.

 

[marks]

Probably not the best example then... But good idea on the intent which I thought was the major criteria.

But if I'm going to a property course because I'm looking at ways to expand my rentals and expand the number of rentals, it may not be deductible.
Trying to see what other tests I should be looking at for deductibility.

 

[alexlee]

Probably not the best example then... But good idea on the intent which I thought was the major criteria.

Tax isn't always common sense. Stick to the legislation. Don't infer things which aren't there just because they seem reasonable to you. There is nothing about intent in the rule. It's whether the contents of the course is relevant to your deriving of assessable income.

In fact, your example is a good illustration of where the course (accountancy) doesn't SEEM to have anything to do with the services provided (hairdressing) but may still be deductible (the nexus being the running of the business).

 

[vaughan]

I was reading up on this today: courses related to what you currently do are likely deductible because it is related to generating current income. Courses related to improving yourself -- getting a better job -- are not deductible because there is no income yet.

 

[Terry_w]

An expense is generally allowed as a tax deduction if it is incurred in generating income - in this case rental income. Also, timing is important if the expense is to be deductible. The expense has to be incurred after you own the property ? usually after settlement.
According to ATO regulations,
- If the program relates to increasing wealth ? no deduction
- If the program relates to acquiring/sourcing property ? no deduction
- If the program relates to improving the value of a property ? no deduction
- If the program relates to improving rental revenue ? yes deductible
- If the program relates to reducing rental expenses ? yes deductible
- If the program relates to getting better tenants ? yes deductible
- If the program relates to better managing the agent ? yes deductible


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Notice the common denominator in the above. If it relates to an increase of currently receiving income or decrease in expenses it would be deductible.

 

[Paul@PFI]

This nexus to income isn't always as clear cut as you may expect.

I used to do a HEAP of teacher tax work. A common deduction would be for overseas travel etc...HSC course work Ancient History etc. The ATO approach to deductibility in these examples demonstraes that nexus to income. Not the fact a teachers earns income espcially if they are salaried but a correlation between the payment for the days travelling and their job. This approach clearly ties the actual payments of wages or salary for the days travelling and the costs incurred.

ATO would ask :
1. Did the school request you to lead students on the tour ?
2. Where you paid for the period of the travel ?
3. Did you take any of the period of absence from Australia as annual leave, LSL etc ?
4. How long have you taught that part of the curriculum...Demonstrate what you learned and how it improved your subject knowledge etc.
5. Details total costs and which if any costs were paid, subsidised or remursed by the employer.

As you might imagine this led to some teachers who disputed my tax interview as I had ask similiar questions...My decision isnt a final decision but I had to ensure I was diligent to documnets their responses and even their insistance to claim deductions.

In almost every instance if the employer paid full wages for every day of travel and no leave was taken it was considered deductible. If school paid for some days and not others it may be approprtioned. If school granted full pay it was generally deductible. If it was undertaken during unpaid leave it was non deductible. This was often the case for teachers who travelled in Dec / Jan to Europe. They didnt ask the employer or the employer didnt subsidise it. In instances where the tour seemed preparatory or incidental to the obvious HSC course they were teaching the full amount would generally be denied.

This can also lead to some packaged fringe benefits !! ie Catholic principal takes paid leave to travel to Jeruselum subsidised or fully paid under salary package etc...HOWEVER one thing to watch. If its salary packaged the principal may be unable to claim out of pocket costs.