Stamp duty as a tax deduction in the ACT - but purchased off the plan

Discussion in 'Accounting and Tax' started by BigKev, 4th Aug, 2009.

  1. BigKev

    BigKev Member

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    I am struggling to find information on this online, and the ATO aren't being particularly helpful. I'm sure someone else has come up against this so figured I would ask.

    I have purchased a unit off the plan in Canberra. Purchased in 2008, stamp duty paid in June 2009. However, the unit is still not complete, and won't be earning me any rental income until sometime in the 2009/2010 financial year. Given that I paid stamp duty in the 2008/2009 financial year, I am trying to find out (with some kind of reference if possible) whether I can claim the stamp duty as a tax deduction in my 08/09 tax return?

    The thing that tells me I can, is NAT1729 from the ATO (Rental Properties guide) which under the heading "Claims for which you can claim an immediate deduction" states
    . Given that I will use the property to produce income, it seems fair.

    However, normally, you can't claim deductions for investments unless you are earning an income to offset against.

    Surely people are up against this all the time in the ACT, but I am struggling to find any references online to this issue...
     
  2. Leikela

    Leikela Member

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    Not necessarily. You can claim interest on a mortgage of a property you are building and intend to rent out, even though you aren't yet generating rental income.
     
  3. BigKev

    BigKev Member

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    What about other expenses? For example, council rates?

    And to play devil's advocate - in this scenario - what happens if you are building a place you intend to rent out and therefore claim the interest on the mortgage. Then, 2 years down the track, you've finally completed the house and decide to move in (rather than rent it out). What about all those interest tax deductions you have already claimed?
     
  4. rugrat

    rugrat Member

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    I am not sure, but am interested to know the answer - DH and I were talking about this the other day.
     
  5. bdc

    bdc Member

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    No experience in this but common sense would tell me that you need to inform the tax office and pay the money back. Much like the FHOG if you don't live there for the 6 months required.
     
  6. Pushka

    Pushka Member

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    Any of the usual deductible expenses are completely deductible during the construction period provided that the purpose of the constuction is to use as an investment property. Expenses that are normally not tax deductible (eg stamp duty ) are added on at the time of later sale when calculating CGT.
     
  7. BigKev

    BigKev Member

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    Well, I've decided to send in to the ATO for a private ruling. That's after spending many hours searching the ATO website for existing rulings and guidance, with nothing being particularly clear about it.
     
  8. Pushka

    Pushka Member

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    Check out page 14 on this document you can find on the ATO website:
    NAT 1729–6.2008
    http://www.ato.gov.au/individuals/content.asp?doc=/content/00191817.htm
    (for the financial year 08 but the same principles apply) where it states:
    Similarly, if you take out a loan to purchase land on which
    to build a rental property or to finance renovations to a
    property you intend to rent out, the interest on the loan
    will be deductible from the time you took the loan out.
    However, if your intention changes – for example, you
    decide to use the property for private purposes and you no
    longer use it to produce rent or other income – you cannot
    claim the interest after your intention changes.


    This link tells you what you can claim for as deductions:
    http://www.ato.gov.au/individuals/content.asp?doc=/content/31258.htm
     
  9. digdisha

    digdisha Member

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    I'd like to understand more about this too.
    I have bought a house and plan to rent it out for approx 6 months before moving into it.
    As I understand I will be able to claim the stamp duty I paid as a tax deduction but I'm not clear about how this works if I only rent the house out for 6 months. Anyone know??
     
  10. digdisha

    digdisha Member

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    Anyone?

    Can anyone give me any ideas on my question above?

    Thanks in advance.
     
  11. Pushka

    Pushka Member

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    I understand that stamp duty is only available as a deduction to Capital Gains Tax calculations - which is when you sell it. You cant simply deduct it. And if only rented for a short period of time it will be apportioned. If you have rented it out then it becomes a PPOR it will be capital gains Tax free for the period you lived in it. But there are other rules that come into play that I dont know about so hopefully someone else will help you further.