Do I need a tax agent now??

Hi Everyone,

We have recently signed a contract for my first IP in QLD. I have always done my own tax as it is very simple. Standard group certificate a few deductions and thats it. Done.

Settlement has been booked in for the 5th of July. At the moment I have only paid the following:

$1000 deposit (to the Agents Trust account)
Building & Pest Inspection (paid & completed)
Depreciation Schedule (paid but not completed yet)

With this in mind is there any advantage in getting a proper tax agent for the 2015-2016 tax period? I didn't think there was but upon speaking to the depreciator she mentioned that because I have paid the deposit already then I can make a claim this financial year.

Thanks
Ben

 

Paying the depreciation before you own the property is different. It has probably turned that into a capital expense (given it's impossible to make a case the property is available for rent when you don't even own it and that it would be non-deductible if the property isn't available for rent). Can't say I've ever seen anyone do that before and one of the other accountants may have seen and claimed it potentially regardless of the lack of nexus to any rental property because it would normally be deductible but I would absolutely be taking the conservative approach and capitalising that expense personally.

The deposit and the BPI are both capital items that form part of the cost base of the asset and are not deductible expenses so there is no claim there. Given you don't own the asset it would be impossible for you to be making it available for rent which is the general requirement to claim any rental deductions.

I guess if you can comfortably answer the difference between capital items and expenses, borrowing costs, what items on a settlement statement are deductible and what are capital and similar items that you would have no need for an accountant. If you don't feel very confident on every one of those topics it's probably time to consult with someone who is because those are the more basic taxation issues on a rental property.

Are you also confident in calculating your cost base and know everything that should go into it?

 

You don't know what you don't know!

 

Thanks @wogitalia - the good news is that I haven't paid it yet. Its sitting on my desk to be paid tonight. The main reason I was getting it done prior to settlement was so that it was vacant and easier for the depreciator. Judging from your post I would be better off waiting until settlement and then organising it?? This making it deductible rather than a capital expense.

That would mean the only items I am paying this current financial year are BPI and Deposit (all of which are capital items. So my tax return should be stock standard again for 2015-2016.

Thanks @Terry_w - I just wanted to ask prior to forking out for a simple stock standard tax return. Taking on any more clients at the moment?

 

Yes, but I am not an accountant, but a lawyer so don't do tax returns.

 

Yep, pay for it next year is the best bet as that will have a direct nexus to a rental property and thus make it immediately deductible and the maximum benefit.

There is no need for an accountant in the current year from the sounds of it as nothing will really be happening until settlement next year. It's probably worth getting one on board then if you're not confident. A rental property isn't difficult in and of itself but there are lot of intricacies that you might miss by not knowing they exist.

 

Thanks @Terry_w I never realised with all the good tax advise you give.

Thanks mate, will be pretty simple again this year. Next year I will definitely get a tax accountant on board. I am pretty anal with record keeping so shouldn't have too much drama.

 

Lawyers can give tax advice too.

 

Fees for a depreciation schedule are deductible as a cost of managing your tax affairs. This is under the same section that allows you a deduction for fees paid to your tax accountant/agent/lawyer. I don't think the property needs to be available for rent when you pay for the schedule for it to be deductible (as long as it will be rented at some stage in the future).

 

Have you got a special exemption from lodging tax returns? (I've heard of barristers not lodging their affairs before but the ATO wasn't too impressed).

 

Thanks mate, I think I will just leave it until after settlement to be sure. That way everything will be in the same financial year. I was only trying to make it easier on the depreciator with the property being vacant.

 

terry means he doesnt prepare tax returns for clients. not that he is exempt haha he wishes

 

agreed daniel.

it is a cost of managing tax affairs. section d10.

It is accepted that the expense of getting such a valuation qualifies as a tax related expense and is therefore deductible under section 25-5 of the ITAA 1997 which states the you can deduct expenditure you incur to the extent that it is for managing your tax affairs.

For an expense to be deductible in a particular year under either section 8-1 or section 25-5 of the ITAA 1997 the expense must be incurred in that relevant year. Taxation Ruling TR 97/7 provides the Commissioner's view on when the expense is incurred, it provides generally that expense is incurred when a taxpayer owes the money or is definitively committed to the payment.