tax deductible? I haven't bought my first property

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From: Deborah R


Hi Forum,
I started seriously looking at property about three months ago and realised the more I investigated the more I needed to know before I took the plunge and made my first investment property purchase.

My query now is this:

I have spent approx $700 on research reports, computer software, magazine subscriptions, books etc and there is a seminar I want to attend which will cost me about $3,500 in june. This takes my expenses to over $4,000 but I am concerned that this may not be tax deductible because I have not yet made a property purchase which is producing income in this financial year. I know I need to talk to my accountant but I'd appreciate any comments from other forum members.

Thanks in advance, Deborah
 
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Reply: 1
From: Dale Gatherum-Goss


HI

I have no problem with you claiming these costs because you have an intention to produce income from investments.

Dale
 
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Reply: 1.1
From: Jye Walker


Hi Dale,

I am in the same boat here and appreciate the advice. Also, I have purchased 2 properties off the plan with long settlements (1 dep. bond, one bank guarantee). Are these costs tax deductible as well? My costs for the year will be about $6k. Does this entire amount just come off my taxable income at Tax time?

Thanx,

Jye.
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Jye

No, the deposit bond and bank guarantee are not tax deductible. They form part of the cost of buying the property and therefore relate to the cost for CGT purposes.

Bummer, huh?

Have fun

Dale
 
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Reply: 1.1.1.1
From: Les .



G'day Dale,

Now, what if the Deposit Bond money was Borrowed? Is the Interest payable a Tax Deduction?

Note:- Since I haven't used these things this idea may not work.....

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hiya Les

Yes, interest on money borrowed to buy (in full, or in part) income producing assets should be tax deductible.

Well done!

Dale
 
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Reply: 2
From: Katrina Maujean


Hi Dale

While you're talking tax, I'm wondering if you can clear something up for me. My partner and I want to buy our first property - an IP - we will continue to rent. We are eligible for the FHOG though, so we will live in it briefly (within the first 12 months) then rent it out.

If we keep it rented out initially then live in it or vice versa, can it still be treated as an IP tax-wise whilst it's being rented out or will it be considered PPOR the whole time due to the grant? Not sure of the best way to do it and would like to know the advantages / disadvantages involved.

Any info you can offer would be much appreciated.

Katrina
 
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Reply: 2.1
From: Dale Gatherum-Goss


Hi

Technically, you should live in the place first to satisfy the conditions of the FHOG first and foremost. At the same time, it sets in place the exemption from CGT for a while should you sell it within 6 years of moving out.

Doing so, means that you should not claim it as a rental property during that time and accordingly, you will lose some of the initial tax breaks that might have been available if it is negatively geared.

Good luck and congrats on getting into the game

Dale
 
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Reply: 2.1.1
From: Katrina Maujean


Thanks so much Dale... much appreciated.

Kat
 
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Reply: 3
From: Mark Petterwood


Hi,

I am new to this forum so I do not know Dale's qualifications to be giving accounting advice.

I work for an Accounting firm and manage a Property Investment and Education Service in the Firm. I am not an Accountant.

I read with interest a couple of queries in this thread and through my experience I have seen these questions many times.

I then ran the queries past a qualified accountant who also invests in property.

Firstly, any costs associated with learning about, checking, books etc before you buy a property are not deductible. If you buy a property then it it still questionable as to whether you can claim the cost of seminars.

Secondly in relation to Deposit bonds, bank guarantee, etc. These can be considered as borrowing expenses and therefore deductible over 5 years or the life of the loan which ever is lesser.

Please remember I am not an accountant but I see these queries everyday and have some good accountants who invest in property supporting me.


Hope this helps.


Regards



Mark
 
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Reply: 3.1
From: Mark Laszczuk


Mark,
My commendations to you for being concerned enough to check with your queries. However, Dale is a practicing CPA as well as a property investor and brand spanking new author. He also has the enviable (in accountancy circles, that is) claim of never losing a fight with the ATO. He is very conservative in giving out advice (by that I mean that he doesn't give advice that could be construed as illegal or even giving the slightest hint of being illegal. Now, with all of these credentials I feel fairly safe when it comes to accepting and using his advice. Maybe you should discuss your concerns with him?

Mark
'no hat, some cattle'
 
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Reply: 3.2
From: Dale Gatherum-Goss


Hi Mark

Thank you for providing a timely reminder to everyone here that it is important to get good advice from your own trusted advisor rather than just accept what is said on this (or other) forum.

Dale
 
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