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NRAS, Tax and NANE?

Discussion in 'Accounting & Tax' started by smallbuyer, 12th Sep, 2016.

  1. smallbuyer

    smallbuyer Well-Known Member

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    Hello,

    A few questions regarding NRAS, Tax and NANE income.

    RBA Content | Australian Taxation Office

    Does anyone have a list of expenses that aren’t affected by this and don’t need to be reduced?

    Can you add back vacancies when calculating the % that expenses need to be reduced by?

    Eg if your NANE is $2500 and your rent is $10000 you would claim 80% of your expenses. However if you property was vacant for 10 weeks of the year so your rent would have been $12500 without the vacancy can you do the calculation using $12500 as your ‘rent’. Meaning you can claim 83% of your expenses?

    You can claim expenses when a property is available for rent so by the same token I would think when your property is available for rent you should be able to use this lost rent in the calculation.

    Another similar scenario is what happens if you have rent default from a tenant and have lost rental income. I would assume any insurance payment to cover lost rent would count but what about anything that is actually lost

    It is possible to have vacancies for up to 3 months and not lose any of your NANE I believe. If you combine this with a few month lost rent from a string of bad tenants on cheaper low rent property you could be getting close to losing 50% of expenses if you can use these add backs which seems completely unreasonable.


    Any thoughts?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  3. smallbuyer

    smallbuyer Well-Known Member

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    Thanks Terry. Still no further clarity since this old discussion? I cant see anything more on the ATO website, i would think they would have more than a private ruling by now. Would be great to get some idea on how the ATO feels about the issue with vacancies or unpaid rent without having to get a private ruling.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would think it is a straight forward apportionment.
     
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  5. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    I don't think you can take into account vacancy periods in the way you are suggesting.
     
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  6. smallbuyer

    smallbuyer Well-Known Member

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    Would be a shame if you cant but tax law is full of things that dont seem fair and reasonable :)
    I would assume if someone missed out on their NANE (which happened to a few people last year who got no NRAS at all) you would be able to claim 100% of the deductions even though part of these deductions relate to your failed attempt to make NANE income?
    Perhaps this is not the case though as i thought for a deduction to be claimed the expense has to relate to trying to make taxable income?
     
  7. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    I think that is how it will be administered.

    What you say does have some legal basis but I'm not sure how you would practically apportion without using actuals. For example, I don't think you could assume no vacancies. Maybe there is some guidance in another context would be helpful but don't expect to find anything in an NRAS context.

    My understanding was that the ATO was not actively enforcing apportionment as they were expecting the law to be changed to address this issue. It was not intended that NRAS owners would need to apportion deductions (but as a matter of the existing law they have to). It is now highly unlikely that the law will be changed and so the ATO now has some public guidance on apportionment.
     
  8. smallbuyer

    smallbuyer Well-Known Member

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    Good point about vacancies, its always good to remember them when doing all your calculations.
    Interesting what you are saying about that the law was going to be change but now isnt. Did the Govt say it was going to change the law when they brought in NRAS and then changed their mind?