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  1. Hi I have had a search on this topic but would like to discuss a bit further. I've been advised by my accountant (and a second one) that Buyers Agents fees are capital costs and therefore not deductible against income tax. From what I can see on other posts on this topic it agree's with this view.

    Why is then that quite a few BA's advertise that their costs are deducitbile ? Is there a grey area here?
     
  2. Your accountant is 100% correct. BA fees are not deductible. Even if they were a registered tax agent and BA the fee would not be deductible as it relates to services and advice in acquiring a (future) income producing property. That isnt deductible under general tax principles.

    ATO Ruling ID 2009/9 contains the ATO views. (That ruling was in respect of an apparent scheme that would mask BA fees as a PM expense).

    A red flag moment - If a BA says the fee is tax deductible find a honest BA who wont tell porkies.
     
  3. Terry_w

    Terry_w Well-Known Member Business Member

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    This one is black and white! No greyness.

    A fee to source a property is a capital cost.
     
  4. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    BA fees are capital in nature and form part of the cost base. However if funds to pay the fee are drawn from a deductible source, eg LOC or investment equity split, then the interest on the source is generally deductible.
     
  5. Agree. Its important that all buyers know two things about BA Fees:

    1. If borrowed money is used the interest should be deductible ; and
    2. The cost may well be a CGT capital cost but remember that this adds to the cost base along with stamp duty, legals etc and will reduce the future capital gain. The cost isn't just "lost".

    And importantly buyers need to assess the professional merits of the value a BA can deliver. Identify properties, find, filter and negotiate.
     
    Last edited: 20th Apr, 2016
  6. Terry_w

    Terry_w Well-Known Member Business Member

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    Yes it might be some confusion between claiming the cost v claiming the interest on money borrowed to pay for the cost - often happens.
     
  7. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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  8. Rob G

    Rob G Well-Known Member

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    Not if the purchase contract falls through.

    1. No CGT asset acquired, no cost base to capitalise.

    2. No interest deduction because funds not used in earning assessable income - the asset is the source of a passive investor's income and the funds have not been used in relation to acquiring or using that asset. The BA fees are preliminary expenditure to the income exercise.

    Mind you, the preliminary expenditure argument may also be applied to BA fees even if the property is acquired if there is a 'property search' component.
     
    Last edited: 20th Apr, 2016
  9. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Well obviously you cant claim against an asset you dont own. Same for lost legal and other related capital costs if you dont proceed with purchase.