Claiming expenses on the one that got away

Gday tax team

Say if you've chased a property and gone through building and pest (or other costs) but then its fallen through due to what the report has found or other reasons, can you claim the cost of the building and pest even though you haven't actually bought the property?

Also, minor issue but if you used equity offset monies does that get messy or can you claim the small amount of interest also? or is that another can of worms??

 

Doesnt relate to income so cannot be deductible.

See my tax tips on using offset money. It is not borrowed money so no direct interest to claim anyway.

 

ah ok fair enough

thanks @Terry_w super quick responce!

 

These expenses are often considered to be capital expenditure however until the CGT asset is acquired these cost elements cant add to a CGT cost base. Similarly travel expenses etc arent deductible as there is no nexus to production of income until you own the asset or have at least contracted to buy it. Such costs are preliminary and not deductible and also not a CGT cost as there is no CGT asset.

Sometimes its best to mentally write off these costs as a cost that avoids later problems.

Using offset $ should just increase the interest on the linked loan. If it was your PPOR this interest remains non-deductible. Using offset $ does not cause a new borrowing.

 

Do people think this is a fair outcome from a policy perspective? They have section 40-880 (deduction over 5 years) for "business" blackhole expenditure but this isn't available for investors unless they are "in the business" of investing in property (which would be very rare).

Should investors be able to claim a deduction for the costs of failed investment purchases over say a 5/10 year period? I doubt this would ever eventuate, but as a matter of policy/fairness...

 

I dont think they should as there is no connection to income.

 

Taxation law isn't about what should or shouldn't be permitted. Its a matter of fact.. Subjective facts sometimes. The blackhole expenditure concessions and the ability to write off structure implementation costs are relatively new initiatives in the timeline of taxation law. These changes were made in budgets to give small business some concessions (large business would find this change immaterial, the changes was intended to address small business costs).

What applies to small business and investors is miles apart. I would think the chances of investors getting more tax concession has a 100% certainty of not occurring in the foreseeable future.

 

can't, the ato youtube vid explain it pretty well. money you spent looking for a property to buy you can't deduct that.