Join Australia's most dynamic and respected property investment community

Building Insurance purchased in financial year

Discussion in 'Accounting & Tax' started by markson, 30th Jun, 2016.

Tags:
  1. markson

    markson Well-Known Member

    Joined:
    14th Feb, 2016
    Posts:
    310
    Location:
    NSW
    Hi,

    Was hoping to get some clarification.... I am due to settle on a property next month (July), house will be available for rent from the 7th of July. I purchased building insurance for the property in June.

    How does the deductabiliy of the insurance work when the cost was incurred in a different financial year? Is it done on a proportion basis or do I need to cancel this policy and renew it again next financial year?

    Thanks in advance
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    The cost should be deferred to the time when it is available to rent. 2017. The ATO has a private ruling on their register that if the property is currently tenanted and you buy it with tenants then you can claim in in 2016.
     
  3. markson

    markson Well-Known Member

    Joined:
    14th Feb, 2016
    Posts:
    310
    Location:
    NSW
    Thanks @Paul@PFI - so does that mean that even though I have already paid for it in 2016 I can just simply claim it in 2017? It doesnt have to be purchased in the financial year it is available for rent?
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    The policy is incurred for a twelve month period of time. Look at borrowing expenses...They may be paid this year and deferred for as much as 60 months. Prepaid expesnes spanning 13mths + must be apportioned to each tax period. The interst example in Steele's case allows a deduction BEFORE income is available.
     
    markson likes this.
  5. markson

    markson Well-Known Member

    Joined:
    14th Feb, 2016
    Posts:
    310
    Location:
    NSW
    Thanks Paul. I appreciate the info.