Claiming expenses but in spouse's name

Suppose a property is in the name of my spouse but I sourced a property, undertook a renovation, made repairs to increase rent, can any costs incurred (invoices are in my name eg: flights, accomodation, car hire to source materials, project manage etc) be added to her capital base for the calculation of CGT?

For any future maintenance issues that I need to visit the property in person, can these travel costs (in my name) be a taxable deduction?

Thanks.

 

You can incur expenses on her behalf and be reimbursed. But you couldnt claim travel and neither could she if she not go.

 

Is travel not considered an expense if I was flying there to project manage a value-adding renovation prior to selling a property?

 

How does it relate to you producing income?

 

Sorry, to be clear two separate things:

1) flying to project manage a value-adding renovation which increases property price and hence CGT. I presume I can add this expense to cost base even if in my name.

2) flying to project manage repairs (ie fix water damage from roof leaks, replace broken air con etc). I presume this can be a tax deduction even if in my name.

 

who owns the property?

 

She is sole owner so the question is if it's a tax deduction on her tax return.

 

As a general rule, a loss or outgoing will not be deductible if it is incurred in gaining or producing the assessable income of a person other than the one who incurs it FCT v Munro

In order for a deduction to be allowable, there must be a nexus between the incurring of the outgoing and the assessable income being derived.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

The expenditure must therefore be related to the production of assessable income of the person claiming it.

sounds as though you incurred an expense relating to a property she owned. see above.

if you had charged her for the flights, services etc and this was commercial and not a part iva contrived arrangement then you would include the assessable income in your return and she would then have incurred an expense. tax invoices and abn in your name would need to be considered.

 

not unless she flies up there.

But Mike may have a solution. You enter a contract with your wife and charge her for your expenses.

 

Then your wife will claim the payment to you on her tax return.

You will then have to include the payment as income on your return.

Then list the expenses as deductions. If you are paid for your time it will be taxable. If only reimbursed expenses then the deductions will cancel the income.

Messy.

Check with your accountant first.

Marg

 

We do this, but owner is there, the costs from a joint account, the invoices are for/to the property, if they include my name it is only because they may only have my name or I am the nominated contact, the money/items are spent on the property, not something I take home or have use of.

I do not see why it would be any different for you doing the buying on her behalf if she does not attend and take part, but she can't claim travel etc she has not taken or used.

The only way she can claim all these extras if you ask me, would be for you to invoice her fully as a contractor, she can use the full invoice, but you have to then operate as a business and show the payment as business income, I do not think this will be worthwhile in most cases, depends how often you are doing this or intend to keep doing it and the $ amount.

 

I would also keep a record of the proof of payment.

This is an area where I would recommend getting proper advice

 

A CGT outgoing yes. A deductible outgoing no.
The renovation (call it repairs it still a renovation where the whole project is a CGT issue) is a CGT cost. Hence the outgoing if you undertake it as her onsite agent would be a CGT outgoing that adds to the costbase reducing the potential gain when sold. Of course only 50% of the tax benefit arises this way where the property was owned 12mth+

Can you claim the cost ? No. Mikes view is clear.
Can she reimburse you for the outgoing ? Yes. In which case she claims it. Not you.