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Meeting with the property manger tax deductible?

Discussion in 'Accounting & Tax' started by cherubym, 22nd Jan, 2016.

  1. cherubym

    cherubym Well-Known Member

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    Hi PCers,
    I am wondering if anyone knows whether expenses related to meet an interstate property manger to sign the docs and inspect the rental property are tax-deductible or not. The property hasn't settled yet. But it is going unconditional in 2 days and just finalising everything related to renting the property out right after it becomes unconditional.

    Thanks!
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    no.
     
  3. cherubym

    cherubym Well-Known Member

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    What about after becoming unconditional and the property is already ready for rent?
     
  4. Xenia

    Xenia Adelaide Property Manager Business Member

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    Terry will correct me if wrong but I would guess yes because there would be a future income to deduct against.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perhaps at the point where the property is advertised for rent the expense may be associated with trying to earn an income and may be deductible.
     
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  6. cherubym

    cherubym Well-Known Member

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  7. Cactus

    Cactus Well-Known Member

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    Iirc the expenses could be capitalised though which would reduce your cap gain latter.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Do you mean it could be a capital expense?

    Capitalised really means added to a loan.

    These expenses may not be capital expenses because it is before the income started. I therefore think that borrowing them could possibly result in a mixed purpose loan.

    I would suggest you seek proper tax advice before doing this.
     
  9. wogitalia

    wogitalia Well-Known Member

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    It's a complicated one.

    If your property manager were flying to you with the documents for signing and conducting the property inspection they'd absolutely be second element parts of the cost base of the property (reducing future capital gain on disposal).

    What you've mentioned falls into a grey area where it really doesn't fall into any of the 10 categories on which second element costs are determined. What is certain is that the inspection of the property part is not included, it would fall under the "search fees" but travel is specifically excluded on that category.

    Whether you could argue that you have to fly up to sign and thus it's a part of the costs of transfer is a very grey area but with modern technology not requiring it I think it would be a hard point to prove if you were ever questioned.

    You'd be better off paying the property manager to do the inspection for you and signing the docs from interstate though, imo, if that is a viable alternative.

    It absolutely will not be deductible in the current year though as there will be no nexus to any income. Travel after the property is being rented though will be at least partially deductible, so perhaps another option is to do your inspection after it has been rented if that's also a viable alternative.
     
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