What do you claim at TAX time for your IP?

A

Alien

Hi All,

Besides the interest and the basic depreciation schedule what else do you claim in relation to having 1 or more IP's?

Cheers
 
Rixter

Rixter

skater said:
Add to that list all the deductions for a Home Office, but only if you are running a Property Investment Business, which is completely different to someone who has one little IP.
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I claim Investment educational products and journals too such as books, CD's, DVD's, magazines, seminars etc etc.
 
skater

skater

Rixter said:
I claim Investment educational products and journals too such as books, CD's, DVD's, magazines, seminars etc etc.
Click to expand...

Ah, yeah, forgot that. I do too, although in all honesty, I haven't bought anything lately.:D Another thing, I think you would have to be careful about claiming though, depending on whether you are running a business, or have one measly NG IP.

Also, my computer and internet connection, although that does come under Home Office expenses.
 
D

dr.jauncey

Hi, you can claim an expense if it is incurred in the process of earning income. You would need to have evidence of having incurred the expense and be able to show that it is reasonable to have done so.

Another common example is paying a low-income spouse a small allowance for their efforts in assisting with bookkeeping and general management of the portfolio.
 
T

tax-man

can someone expand on the 'travel' item

Hi
I visited my IP in Far North QLD recently. I was there for 4 nights, during which I:
- inspected my IP
- spoke to a few local estate agents

but the other time I went snorkelling, bushwalking etc. etc - you get the picture :)

So what does 'Travel' include:
- return air tickets?
- hotel transfers from airport?
- accomodation for all 4 nights or less?
- what about food I ate while I was there?
- Car hire for the 1 day? (It was the day I inspected my property)

Thanks!!!!
 
D

dr.jauncey

tax-man said:
So what does 'Travel' include:
- return air tickets?
- hotel transfers from airport?
- accomodation for all 4 nights or less?
- what about food I ate while I was there?
- Car hire for the 1 day? (It was the day I inspected my property)
Click to expand...

Hi, I am making a few assumptions here. I am assuming that the property is not held by a trust or company. I am also assuming that either you went by yourself or if you took a partner or children then they are also on title.

Given that the trip was largely private, the tax office will deem the entire airfares to be private.

Accommodation will need to be apportioned. If car hire was specifically for inspecting the property then this may be ok.

See this page on the tax office website.

ATO said:
Travel expenses
Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. You may be able to claim local expenses that are directly related to the property inspection and a proportion of accommodation expenses.

A common mistake is to claim a deduction for the cost of travel when the main purpose of the trip is to have a holiday and the inspection of the property is incidental to that.
Click to expand...
 
R

regrow

tax-man said:
Hi
I visited my IP in Far North QLD recently. I was there for 4 nights, during which I:
- inspected my IP
- spoke to a few local estate agents

but the other time I went snorkelling, bushwalking etc. etc - you get the picture :)

So what does 'Travel' include:
- return air tickets?
- hotel transfers from airport?
- accomodation for all 4 nights or less?
- what about food I ate while I was there?
- Car hire for the 1 day? (It was the day I inspected my property)

Thanks!!!!
Click to expand...

I recently flew to Melbourne for 7 days of which 5 were for investment purposes and the other 2 for personal. Wife and child came but we used FFlyer points for flights and claimed the rest ie 5 days deductible 2 days not. Easy:)

Regards

Regrow
 
6

65fbk

From the ATO doc I linked above:

Apportionment of travel expenses
Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses.
If you travel to inspect your rental property and combine this with a holiday, you need to take into account the reasons for your trip. If the main purpose of your trip is to have a holiday and the inspection of the property is incidental to that main purpose, you cannot claim a deduction for the cost of the travel. However, you may be able to claim local expenses directly related to the property inspection and a proportion of accommodation expenses.
EXAMPLE
14: Apportionment of travel expenses
The Hitchmans also owned another rental property in a resort town on the north coast of Queensland. They spent $1,000 on airfares and $1,500 on accommodation when they travelled from their home in Perth to the resort town, mainly for the purpose of holidaying, but also to inspect the property. They also spent $50 on taxi fares for the return trip from the hotel to the rental property. The Hitchmans spent one day on matters relating to the rental property and nine days swimming and sightseeing.
No deduction can be claimed for any part of the $1,000 airfares.
The Hitchmans can claim a deduction for the $50 taxi fare.
A deduction for 10% of the accommodation expenses (10% of $1,500 = $150) would be considered reasonable in the circumstances. The total travel expenses the Hitchmans can claim are therefore $200 ($50 taxi fare plus $150 accommodation). Accordingly, Mr and Mrs Hitchman can each claim a deduction of $100.
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Z

zargor1

Add to that list all the deductions for a Home Office, but only if you are running a Property Investment Business, which is completely different to someone who has one little IP.
Click to expand...

And also be careful that you are claiming only home office expenses, not place of business expenses or doing anything to promote your own main residence as a place of business.

Why?

Because should you ever sell your main residence, guess what? You're up for CGT because they're business premises, not simply a home office!

Zargor

DISCLAIMER: I never give advice, merely thoughts to consider and anything that I say and you rely on to your disadvantage will merely be God's way of saying "Eat dem bananas"
 
C

Casserole Dish

Hi! Just bringing this up again as the last post is pretty important, I feel. Would it be a percentage thing though? ie. the home office is only 5% so you'd pay 5% CGT?

Also those ppl paying their spouse/children to 'work' for them are creating a 'home office' situation where CGT would be payable?
I'm grumpy because our accountant said we couldn't do that as it's not an 'arms length' arrangement and the tax office is getting on to those that do push it.

I'd be interested in more information on this. My hubby and I are often amazed at what we are told people are claiming.
 
Rob Williams

Rob Williams

Casserole Dish said:
I'd be interested in more information on this. My hubby and I are often amazed at what we are told people are claiming.
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It's a self assessment system. People can claim anything they like.
Either their accountant is not doing their job properly, or people are "massaging" things to keep the accountants happy.
Or they are doing their own returns.
However, when they get audited and they will get audited, it won't be a fun time for them. There will be tears, accusations and lots of blame being thrown around as they scramble to pay bax tax and penalties for all the years being probed by the auditors.
Meanwhile, you and your husband will sleep soundly ay night knowing you're not colouring outside the lines.
You can't put a value on that peace of mind.
 
C

Casserole Dish

Thanks for the quick reply Rob! Obviously you are sitting on your computer like me when we should be out in the sunshine enjoying this lovely Sunday!

I guess I get frustrated at the ppl swimming along with no audits slowing them down and we are always good little taxpayers (itching to buy to another property) plodding along.

You are very right, though Rob, we can sleep at night (if the kids let us)
 
Z

zargor1

Hi Casserole,

Just a few points to re-iterate Rob's point.

My experience is that everyone complains to their accountant about what their friends, family, enemies, dogs, lovers are claiming and apparently they are all getting away with it. Whilst it appears the ATO is going softly, softly with taxpayers because of GFC and waiving interest in certain situations, what the ATO giveth with one hand ...

Audits will always be there and right now the ATO system is off-line until next Wednesday becuase they are installing a new, superbeaut, data-matching system, to repalce the main one they have had for the last 43 years. Care to hazard a guess as to why that is??

With your question re CGT, if you are operating a place of business and you sell, the CGT is usually calculated on a floor-space apportionment.

With your question regarding paying family members, if you do this be very careful; so many ways to stuff this up.

1. If you are paying wages, make sure they are commercial or you risk having the deduction denied;

2. If you are paying wages, are you then conducting a business? If so, where are you conducting it from? Is CGT then an issue??

3. If you are paying wages, do you have an ABN and ahve you collected TFN declarations?

4. Speak to your accountant regarding the implications of PSI income because if I go into it hear, you will fall into a coma.

As an interesting point, all accountants have a rating with the ATO (bit like a rating 1 with your insurance company). If the accountant is rated a "1" then he/she is in the good books with the ATO, they don't do anything dodgy and stay away from clients who, shall we say, like to press the envelope. Rating 10 means the ATO has its next 12 months work set-out auditing all your clients.

Isn't life fun?!

Zargor

DISCLAIMER

All comments above are definitely not advice and are provided on the basis that the reader appreciates they just sound really impressive and inflate the ego of the author.
 
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