Can you claim second hand goods for partial rental property

Discussion in 'Accounting & Tax' started by Fina09, 13th Jan, 2022.

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  1. Fina09

    Fina09 Member

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    I’m planning to partially rent my newly bought place. 1/3rd of it.
    Wondering if I buy things from marketplace or gumtree, can I claim them?

    Talked with a random accountant, they said I can’t claim because I need proper receipt, not handwritten. Is it true?

    Then I’ll have to buy new goods instead seconds.

    If anyone already claimed for 2nd hand goods, please help.

    thank you.
     
  2. Marg4000

    Marg4000 Well-Known Member

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    I did back in the 1980s.

    Then again, I also filled in a paper income tax return and posted it to the ATO.

    Both about as likely today.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It doesn’t matter if new or second hand you can claim it following the normal rules but you might have to substantiate the claim in the future

    but you might not be able to claim depreciation on second had items anymore. Not sure if this includes items new to you but second hand

    what where you planning to buy?

    @BMT Tax Depreciation will know on the depreciation side
     
  4. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Since 9/5/17, you can't claim depreciation on any used plant and equipment in residential properties. It doesn't matter who used them, whether the current owner or previous owners.

    I wonder at the method used to summon a random accountant (dice roll?), and can't comment on whether a handwritten receipt is valid or not, but they're at least right--either for the wrong reason or maybe another correct reason.
     
  5. Ross Forrester

    Ross Forrester Well-Known Member

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    A hand written receipt is fine! The law does not give any discussion of the font setting, paper thickness or colour of a tax receipt - it just needs the name, date, address, abn, in English and amount (or an abn not necessary form).

    So yes - a case of being correct for the wrong reason.
     
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  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    A item that costs $300+ will likley fall under Div 40 depreciation rules and this would deny any depreciation asd Chris says. For a item below that costs it would be eligible HOWEVER, it is possible it and others form part of a set for initial furnishings and property contents. For short stays etc the ATO expects that to be written off over time not upfront. There is no prescribed policy but I generally advise a 2 year effective life be considered. Replacements thereafter may be deductible.

    Substantiation rules apply. A handwritten receipt should be able to identify the seller and be dated and then it may be acceptable.
     
  7. Fina09

    Fina09 Member

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    Could you clarify “used equipment” plz? Does it mean second hand? Because if I buy a new one and next year it becomes used.

    if I buy seconds things <$300 (shelf/bed), would they be claimable?

    So from the above replies it seems I can get handwritten receipt even they don’t have ABN and claim it.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Can you clarify the intent of the legislation? Has it been tested? I was of the impression that used related to buying with the existing building not purchased elsewhere but it would make sense if it were used in another residential premises, it would not qualify even if it were 'new' to the building.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Legislation was designed to stop people claiming things multiple times as properties changed hands. Imagine a $1000 expense claimed by person A who sold the property to person B who also claimed $1,000 and so on
     
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  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Intention was to reduce deductions. Policy intention is irrelevant. It is law and does not need to be "tested". It is tax law. No question about it.

    Its as effective as the ban on travel related deductions. I still get asked about reasons why people think their case is an exception. The law says no and gives only some entities a deduction. That law change was also made to stop what was determined through audit evidence to be a large number of incorrect and excessive claims. It had a revenue impact on tax collection so the Govt decided to stop all deductions. Unfair for some but tax law need not be fair.
     
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  11. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Unfortunately, it's as straightforward as it sounds: has anyone used it? I.e., is it not new, purchased as such and installed for the purposes of use for investment?

    If you buy a new asset, use it and then put it in an investment property, it is used because you have used it.

    Note: this only applies to plant and equipment. If you were to, say, repurpose capital works items like a laundry tub or pavers/bricks, etc., you'll be able to depreciate those, albeit it at the low 'n' slow rate of 2.5% p.a. over 40 years.

    It depends on the item: if plant and equipment, no. If capital works, yes. You mention a bed--that's furniture, i.e., plant and equipment, so you can't claim it if it's used, but you can if it's new (which, if it's under $300, it probably wouldn't be). A shelf? If we're talking about a movable unit, it's plant and equipment, but if we're talking about shelving that you'd attach to the wall with brackets? Capital works, and you're able to claim it.

    Do the distinctions make much sense? No, but that's nothing new. Most tax rulings are arbitrary in some way.

    Used is used. Back in 2017, we lobbied quite hard against this new legislation/thought bubble. It didn't work. Paul has given a reason that sort of justifies the legislation, but it still doesn't make sense: if you buy a property that's two years old, why should you miss out on the remaining ten years of depreciation claims for its oven?

    I imagine a lot of investors are testing the legislation (by lying), but that's nothing new. E.g., we ask people for their renovation costs that have somehow gone missing. Looks like we have no choice but to estimate them!
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The ATO have their views on "first use" and do allow some limited exceptions eg where a developer initially rents a property and a new buyer then acquires it. Alos minor or infrequent use by a owner. Eg Fred has a new build and lives in it for 2 nights and uses the dishwasher. Thats OK. But if its a asset acquired and used from some one who was the first or subsequent onwer its a used asset. I a owner uses assets then rents their house - No concession. Only "new" assets based on acquisition and "first use" can be considered. The first use excludes all things acquired from someone else who is not the retailer.

    Rental expenses you claim over several years
     
  13. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Paul makes a good point. There are some exemptions where my saying "used is used" isn't correct. "Occasional or incidental use" by the owner is up to four weeks out of the year--say, if you have a holiday rental that you want to make use of here and there.
     
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  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    This is the difference between websites and tax advice. The ATO doesnt delve into details and many things on its website arent as they can be read.
     
  15. Fina09

    Fina09 Member

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    If owner lives for a month or 2 and then rent it out partially, Can depreciation be claimed showing it was bought for rental?

    if furniture price > 300 what’s the rule to depreciation claim?
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No
     
  17. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    No, as terry indicates.

    If a new item costs $300+ its commences depreciation if its a Div 40 asset and also used for producing rental income AND was newly acquired as a new & unused item. As the property is partially used it can be partially claimed as a new asset until such time that the property use stops. However if the asets was first 100% used for private purposes the opposite occurs and none can be claimed. However if owner later vacates the % claimed cant increase as the private element remains ineligible. Just the original % that related to the rental use.

    The policy intent is Div 40 deductions are being phased down.