Travelling Costs / Deposit Bonds (was: Calling Dale)

Calling Dale

I understand that the travelling costs incurred in going interstate to purchase a property are classed as "purchase costs". If you have bought a property off the plan interstate (i.e. exchanged contracts) are the costs of travel and accommodation for final inspection and to organise installation of blinds etc tax deductible as you now "own" the property or are these still classed as puchase expenses.

Also, is the money paid for a Deposit Bond a purchase cost, a borrowing cost (depreciable over 5 years) or an insurance cost which one treats like an interest charge? Is the fee paid for a Bank Guarantee a borrowing cost or a bank charge or a holding cost and what is the difference?

Thanks for the assistance....

Donna L.
 
Re: Calling Dale

Hi Donna

Originally posted by Donna L
I understand that the travelling costs incurred in going interstate to purchase a property are classed as "purchase costs". If you have bought a property off the plan interstate (i.e. exchanged contracts) are the costs of travel and accommodation for final inspection and to organise installation of blinds etc tax deductible as you now "own" the property or are these still classed as puchase expenses.

Also, is the money paid for a Deposit Bond a purchase cost, a borrowing cost (depreciable over 5 years) or an insurance cost which one treats like an interest charge? Is the fee paid for a Bank Guarantee a borrowing cost or a bank charge or a holding cost and what is the difference?

Thanks for the assistance....

Donna L.
The deposit bond costs are a cost of buying the property and not in financing the property. As such, it forms part of the cost base for CGT purposes for when you sell. Bummer, huh?

The travelling is a little less clear. If you state that the purpose of the travel is a final inspection before taking ownership, the travel should be treated as a cost base for CGt purposes and not be claimed as a ax deduction. So, I would note in your records the reasons for the travel being to hire a real estate agent to manage the property; and to arrange installation of items not included in the purchase. This way, the distinction should be enough to enable a tax deduction to be claimed.

Have fun

Dale
 
If a deposit bond is used for an off the plan property but the project does not eventually go ahead how would you then treat the cost of the bond from an accounting point of view.

Bill
:confused:
 
Hi wbthom and Rolf,

Wouldnt it have been better to include in the contract that, if the the development does not proceed, the developer is liable for a penalty, payable to you, of an amount not less than the cost of the deposit bond. They are asking for insurance from you, why not ask for insurance from them.

Jamie.
 
Hmmm. Somehow I can't see a developer agreeing to anything that doesn't put them in a winning situation.

Besides, you are using the deposit bond for your own benefit in lieu of a deposit, so why should the developer be liable if that's how you want to structure the deal.

(A bit like borrowing the deposit from your parents then asking the developer to pay interest on your deposit if the deal falls through).

Can't see it happening.
 
Hi Kevmeister,

Sorry but I have to disagree. The developer is never "liable" if you rescind or are unable to settle. They simply receive the amount of the deposit from the insurance company, who in turn chase you for said amount. With long term settlements, this situation is actually beneficial to the developer, as they keep your deposit (paid by deposit bond guarantor) and can re-sell the property at the same price (or higher in a rising market) to the next buyer.

In this situation, the developer is only disadvantaged if the development does not proceed through some fault of their own. Why shouldnt a reputable developer confident of their ability to complete a project to spec. be willing to offer a buyer a guarantee

This situation is also nothing like borrowing the deposit from your parents, unless your parents enter into the same contract with the developer that the insurance/deposit bond company do.

It does happen, because I used this particular clause in my last OTP contract.

Cheers,

Jamie.
 
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