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Asbestos removal from inside house... deductibility

Discussion in 'Accounting & Tax' started by Azazel, 9th May, 2016.

  1. Azazel

    Azazel Well-Known Member

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    From @Bran 's thread, I've been looking into the ATO asbestos removal link @Paul@PFI posted:
    Asbestos affected rental properties - income tax deductions | Australian Taxation Office
    I spoke to someone who had asbestos removed internally and re-gyprocked, then had their IP advertised for rent but didn't find anyone for 2 months, before they gave up and moved back in there themselves.
    I've seen wording to the effect of "must be available for rent" after the works.
    Well, it seems it was available, they just wasn't able to find a tenant in a reasonable timeframe.
    What would be the 'claimability' in this scenario?
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The nexus to income production is important (critical). The decision in Steele's case revolved around interest and may be an ideal basis to seek a private ruling that the capital expenditure was incurred with a view to producing (future) income. If the cost is incurred between tenancies I would see no concern.

    The general view is that asbestos removal under environmental protection is not a repair cost.

    The asbestos removal costs may be a initial repair however. Thats why a private ruling posed to the Commissioner based on your situation may be wise if you havent (yet) rented it out. You can do this yourself....Applying for a private ruling | Australian Taxation Office
     
  3. Azazel

    Azazel Well-Known Member

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    Thanks @Paul@PFI
    I'm not doing it right now, but I'm curious what may happen when these guys submit their tax.
    Really though, there's no dates you put down for the periods that it was tenanted, so how would the ATO know when the incoming rent was from, before and/or after the asbestos removal took place.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Tax returns are all self assessment. Errors reviewed after the event are subject to penalties and interest.

    In practice the ATO would select the return for review for a high repair deduction esp if its year 1. They then note it had just commenced being rented (a field in return is 1st date avail to rent) or see its a new rental. They ask q's or send a questionnaire about rental expenses that includes repair costs. They ask in that about tenancy agreements, acquisition dates etc
     
  5. Azazel

    Azazel Well-Known Member

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    I'm trying to get my head around it, maybe another what if:
    What if they previously had it tenanted, previous full financial year, then for a further half of a financial year until tenancy ended/tenant moved out, did the asbestos removal internally and replaced gyprock, then had it advertised for rent for 2 months and couldn't find anyone (assuming fair market rent, reduced after time etc...) and moved back in?
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Non deductible
     
  7. Azazel

    Azazel Well-Known Member

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    Thanks @Paul@PFI
    What if the vacancy started towards the end of the financial year, and they didn't know it was going to be vacant that long when they submitted their tax?
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    s8-1 provide a general guide to tax deductions.