Tax treatment of settlement enquiry fees

[BLTN]

Hi all,

I'm aware that conveyancing costs are included in the cost base of your property for tax purposes - but I'm just wondering if conveyancing costs includes all the disbursements and enquiry fees, or if it strictly refers to the settlement fee charged by the agent.

e.g. Say your total conveyancing bill is $1,400:

$700 settlement fee
$500 enquiry fees and landgate fees
$200 disbursements and other fees

Do you just add the total of $1,400 to the cost base, or just the $700 with seperate tax treatment for the enquiry fees and disbursements?

Cheers,
BLTN

 

[Terry_w]

Settlement fee would be for the conveyancing = capital cost.
Disbursements are fees the conveyancer paid on your behalf so it would depend on what these are.
Landgate fees may be transfer fee = capital cost
discharge/registration of mortgage may be able to be claimed in full

 

[Paul@PFI]

All $1400 is a capital cost of acquisition + stamp duty

 

[BLTN]

Thanks for the replies guys, I'll just add it all to the cost base then.

I was hoping stuff like the disbursements (telephone, bank cheques etc) would be fully deductible (and arguably it should be).

 

[alexlee]

I was hoping stuff like the disbursements (telephone, bank cheques etc) would be fully deductible (and arguably it should be).

How? They were expenses incurred for the acquisition of the property, not for the earning of rent.

 

[BLTN]

How? They were expenses incurred for the acquisition of the property, not for the earning of rent.

I thought bank fees incurred in the acquisition of the property were deductible though? Like all the fees deducted from the loan advance?

 

[dan c]

I thought bank fees incurred in the acquisition of the property were deductible though? Like all the fees deducted from the loan advance?

Some bank fees are the cost of borrowing money, which is deductible over five full years.

Costs of bank cheques are a cost of buying the property, and therefore capital in nature.

 

[BLTN]

Some bank fees are the cost of borrowing money, which is deductible over five full years.

Costs of bank cheques are a cost of buying the property, and therefore capital in nature.

And the plot thickens...

Are all these different fees listed anywhere? My research suggested that borrowing costs <$1k are deductible, while borrowing costs >$1k must be amortised over 5 years or the life of the loan, whichever is shorter.

I would have assumed that any bank fees in setting up the mortgage (including some government charges that are in there and deducted from the loan advance) would all be inluded under this.

I need to check my mortgage documentation tonight and see just what exactly the fees are, but they come to a little over $500 at settlement. Plus there are bank fees in transferring the funds to the settlement agent and offset account.

 

[speary]

I believe the figure is $100.

Anything over $100 is deductible over 5 years. This is generally LMI, mortgage registration etc. If it's on the settlement statement its most likely to be capital.

 

[dan c]

Speary is right, the figure is $100. Anything over this is a borrowing cost and must be amortised over the lesser of five full years, or the life of the loan.

You need to work out what is a cost of borrowing, and what is a cost of purchasing. Cost of borrowing can be deducted over five years, cost of purchasing will be added to the cost base.

 

[BLTN]

Speary is right, the figure is $100. Anything over this is a borrowing cost and must be amortised over the lesser of five full years, or the life of the loan.

You need to work out what is a cost of borrowing, and what is a cost of purchasing. Cost of borrowing can be deducted over five years, cost of purchasing will be added to the cost base.

That must have changed somewhat recently, I'm sure when I read that it was dated at least some time in 2013. I'll double check it though. I mean if it is only $100 than mortgage account fees would have to be amortised, even though they are paid annually (my annual fee is $398...)

Isn't there a fair degree of subjectivity in whether something is a cost of borrowing or a cost of purchasing?

I mean fees in setting up a mortgage are arguably both. And what about government fees such as mortgage registration? Again, these are arguably both (although obviously I'd argue towards cost of borrowing).

 

[D.T.]

Isn't there a fair degree of subjectivity in whether something is a cost of borrowing and a cost of purchasing?

Fairly pedantic.

Obtaining finance and obtaining an asset are 2 different things and treated accordingly.

 

[BLTN]

I believe the figure is $100.

Anything over $100 is deductible over 5 years. This is generally LMI, mortgage registration etc. If it's on the settlement statement its most likely to be capital.

I looked this up and you are correct - it is $100.

Does that really mean I have to amortise my $398 annual fee??

 

[Terry_w]

I looked this up and you are correct - it is $100.

Does that really mean I have to amortise my $398 annual fee??

That is a bank charge not a borrowing cost.

 

[BLTN]

That is a bank charge not a borrowing cost.

So does that mean it's deductible?

 

[Terry_w]

So does that mean it's deductible?

If it relates to an investment property loan, then yep/

 

[BLTN]

If it relates to an investment property loan, then yep/

Great, thanks for that.

Any idea of the treatment of the Landgate mortgage registration fee?

Seeing as it is a mortgage registration, it would seem to be a cost of borrowing? Hence amortised over 5 years if over $100?

 

[Terry_w]

Great, thanks for that.

Any idea of the treatment of the Landgate mortgage registration fee?

Seeing as it is a mortgage registration, it would seem to be a cost of borrowing? Hence amortised over 5 years if over $100?

I would think a mortgage registration fee would be a borrowing cost - if it relates to a property used as security for an investment loan.

 

[BLTN]

I would think a mortgage registration fee would be a borrowing cost - if it relates to a property used as security for an investment loan.

Yup, my thoughts as well.

Cheers