Join Australia's most dynamic and respected property investment community

NRAS Property Expences

Discussion in 'Accounting & Tax' started by smallbuyer, 27th Oct, 2015.

  1. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    110
    Location:
    WA
    Looking at this private ruling it looks like the ATO is not very keen on people claiming 100% of their NRAS properties expences. Does anyone know any more about this?
    I thought all the NRAS consortium's had tax rulings saying you could claim 100% of the expenses?
    If you have to propertion it what % of expences goes to non taxable income?

    https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/1011845488674.htm

    Cheers
     
    Terry_w likes this.
  2. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,569
    Location:
    Adelaide, SA
    This is why its best to stick to tried and true investments. Since when has the government ever implemented something correctly?
     
  3. chindonly

    chindonly Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    335
    Location:
    Brisbane
    What a weird ruling. So does that mean you apportion the expenses against the rental income, pro rata, and then proportiong the remaining expenses against the governments subsidies??
    Where is euro???
     
  4. Jamie_

    Jamie_ Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    353
    Location:
    Perth
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,942
    Location:
    Sydney
    Interesting - I had never considered this to be the case, but it makes sense.
     
  6. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    1,412
    Location:
    Sydney

    Euro is in Indonesia for a few days :)

    "You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you (or to someone acting on your behalf)"

    All I can tell you is this ; I have hundreds of clients who own hundreds of NRAS properties, and many of them have been audited by the ATO - including myself - and not a single one of them has ever had an issue with this. Or at least, not that any of them have ever advised me of.

    NRAS owners ( whether my clients or not) who have successfully claimed all expenses and encountered zero issues with the ATO may wish to comment further... but I dont know anyone that's ever had this ruling applied.

    But at worst, lets say it was applied to one and all- the NANE represents 25% of the NRAS credit, or $2,729.25, which is a very small percentage of the total income derived from an NRAS property. So if applied, only a very small percentage of the expenses would not be allowed to be claimed . The impact would be relatively insignificant.

    But as I said above - I don't have a single client where this has been applied by the ATO, and many ( including me) have been audited. I went through a fairly lengthy and exhaustive process with the ATO just this year, because I claim @ 180K+ in deductions ...that is to say, they notice my claims! They didnt even raise the NANE apportioning. Either all of my clients and I got lucky, several years in a row, or this private ruling simply isn't being applied by the ATO unless you go out of your way to wave a red rag in front of the bull and invite it to be applied.

    I guess I would ask - does anyone know anyone to whom this has been applied? And what was the actual net impact?
     
  7. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    110
    Location:
    WA
    great to hear they havent applied it even when auditted :) Euro how much grief did they give you during your audit, did you have to provide shoeboxed of reciepts? Where your claims unusually high per property?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,942
    Location:
    Sydney
    It depends on what the auditor is looking for. I have heard of friends audited who have had mixed purpose loans, loans for private expenses yet claimed for investments etc. And they have passed.

    if they don't investigate the full details you can claim anything and get away with it.
     
  9. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    853
    Location:
    Sydney (West) and Canberra
    Pretty sure this is old news, this came out in 2012 or something and would be uncovered by most doing their DD on NRAS. Other issues to note are the severe delays in getting NRAS payments (likely the reason why there's so much secondary stock on the market?), valuation issues, access to stock levels, inability to release equity, etc.

    Plenty of pro's thats covered greatly across the forums.

    With this particular quirk, there's a formula floating around for what portion of expenses your allowed to claim.

    The NRAS payment is 75% Federal Govt (refundable tax offset) and 25% State Government (NANE income). Some technical ruling about claiming deductions against NANE income. Net effect is a couple thousand of yearly income per NRAS property, at most, if applied.

    From my experience, most accountants i've dealt with have no idea about this ruling.

    Cheers,
    Redom
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,942
    Location:
    Sydney
  11. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,569
    Location:
    Adelaide, SA
    I can see why; too busy educating us on tax and legalities :D
     
    Terry_w likes this.
  12. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    1,412
    Location:
    Sydney

    I was specifically audited re my large deduction claims. My claims related to losses associated with my portfolio, which includes 10 NRAS properties and 2 non NRAS properties.

    The deductions I claimed totaled @ 180K for 2014/15 across the portfolio and I was paid a refund of @ 57K on those deductions.

    They also audited a similar claim for 2013/14 - but I'd already been paid that the year before.No adjustment was payable, so I guess they considered my claims for that year to be payable as well.

    I can also tell you that the ATO assessor/auditor, her supervisor and the supervisors supervisor knew absolutely nothing about NRAS whatsoever. Literally nothing.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    Interesting that the ruling ignores the commonwealth incentive amount which is also exempt income like the state govt amount (the tax credit is claimed at Item 13). Applying the logic in the BPR they should also do same to state + commonwealth incentives as exempt income so that the non-deductible is in same ratio as all exempt income.

    Until the ATO issues a Public Ruling nobody other than the BPR applicant should follow this ruling. And NOBODY should ask the ATO to issue one. Only if they issue one may amendment be required. I would doubt such a ruling would pass the public interest test.
     
  14. abbyfresh

    abbyfresh Well-Known Member

    Joined:
    2nd Jul, 2015
    Posts:
    67
    Location:
    VIC
    The deductions I claimed totaled @ 180K for 2014/15 across the portfolio and I was paid a refund of @ 57K on those deductions. --> $123K net loss for a year sounds a lot?
     
  15. Northy85

    Northy85 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    275
    Location:
    Sydney
    That does seem quite high. I might be wrong but, even with $106000 of tax free incentive money you are still losing money??? Surely that's not right, even with my 2 Nras IPs I'm $17000 ahead each year.
     
  16. Guzz226

    Guzz226 New Member

    Joined:
    1st Jul, 2015
    Posts:
    4
    Location:
    Victoria
    The $123k would be a paper loss - factoring in depreciation etc

    The real cashflow loss would be less and once factoring in NRAS payments would be cashflow positive.