Special levy tax deductions

[pmcghee]

I am looking to engage with a couple of tax accountants though putting it out here to see if anyone can provide any advice as this must have been experienced by a few people in the past.

Owners in our apartment complex have been hit with a large special levy and would like to know the best way it can be written off.
We would like to put this down as repair works rather than capital item as this work was completed for fixes and not to improve the value of the property.

I have been advised that with large deductions the ATO will most defiantly challenge this and force the cost to be written down as capital improvements.
Because of this I have also been advised that a specialised accountant is required who which will cost upwards of $7000 as apposed to my current tax accountant.

 

[datto]

$7K WTF. To tell you its a capital expense? I must be in the wrong business.

What was actually done, repaired?

 

[jrc]

How can the accountant advise for the circumstances of each unit owner? Is the body corporate paying for this tax advice? If so, why?

http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9723/NAT/ATO/00001

Was the levy broken down into individual parts eg $200.00 painting, $500.00 clean gutters, $10,000 repave driveway.

$7,000 sounds cheap

 

[depreciator]

I'm not an accountant, but it will get down to how long each owner has owned their unit for.
Roughly speaking, the ATO's definition of a repair is to restore something to the condition it was in when you bought it.
The longer somebody has owned a property for, the greater their scope for claiming work as repairs because the damage/deterioration needs to have happened while they owned the property.
So if somebody buys a property and then does a bunch of work soon after purchase, they are improving the property relative to the condition it was in when they bought it.
Does that make sense?

Scott

 

[pmcghee]

How can the accountant advise for the circumstances of each unit owner? Is the body corporate paying for this tax advice? If so, why?

http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9723/NAT/ATO/00001

Was the levy broken down into individual parts eg $200.00 painting, $500.00 clean gutters, $10,000 repave driveway.

$7,000 sounds cheap

The accountant cost is an individual cost to each property owner since not every owner is an investor.

The repairs are to fix water damage amounts other which has been itemised since some of the works were clearly CI (IE painting exterior building).

I have also gone over TR 97/23 though it is still confusing to read so /I will need to go over that document a few more times.

So if somebody buys a property and then does a bunch of work soon after purchase, they are improving the property relative to the condition it was in when they bought it.
Does that make sense?

Makes sense and will defiantly need to look into this further.

 

[depreciator]

We did something like this a few years ago.

It was a building on The Sunshine Coast and all the owners were hit with a $55K Special Levy for concrete cancer, new exterior doors and windows, new balcony railings and a paintjob.

We had a scope of works and a total figure for the job and sent a QS to meet with the builder and inspect the building.

All interested (investor) owners contacted us and the first thing we asked was when they had purchased their apartment.

We then put together letters stating what we thought they could claim as repairs based on our understanding of the rules, the nature of the work, and the length of ownership. It was only our opinion, but accountants would have liked those letters I'm sure.

It was an interesting exercise.

I took it on myself to break the news to the people who had bought their apartments recently. I still remember the tears from one recent owner.

I asked as gently as I could whether they had got a strata report before buying the place. 'What's that?', they said.

Strata Reports are gold. I got one this week for a flat I just exchanged on.

That $7m job on that building on The Sunshine Coast would have been talked about for years in the strata minutes. Every year, some of the owners would have met and said, 'Ah, you know that bit of repair work we need to do? How about we leave it for another year?' And they would have rushed off to try and offload their apartments.

Imagine how great it would be to have access to that sort of stuff when looking at a house? Imagine being able to read about all the work that had been done over the last 5 years or so and learn about any impending disasters.

Scott