Tax - Amortising upfront costs of purchasing property

If a non trading company purchases a property, how do you treat upfront costs (stamp duty, etc) for tax purposes.

Presumably it is capitalised and amortised? Over what period do you amortise?

Sorry, can’t seem to get working the search function on my 2,500 page Master Tax Guide!

 

Not deductible

 

Let’s say you incurred $10k in stamp duty.

So, it is non deductible in year it is incurred. I get that.

But, do you just leave the $10k as an asset in company’s books? Presumably you must amortise it as it is not worth anything over time (let’s say 10 years).

So, I think you are saying that the amortisation charge ($1,000) is an expense for company P&L purposes but is not an allowable deduction for tax purposes.

Ie. some company expenses are not allowable tax deductions.

 

Cant amortise stamp duty costs

 

Thanks Mike.

So, putting aside tax, how do I properly treat $10k in company books. Do I just hold it in an asset account? When I pay the stamp duty, I credit the bank account (reduction), and what do I debit? Can only debit an asset or expense?

 

Add it to the cost base.

 

Yep, I think that’s the approach.

 

All acquisition costs are incorporated into elements of the cost base....A balance sheet item. Assets = Debit. One day if and when the property is sold the carrying value on the balance sheet should reflect much if not all the CGT costbase so when the proceeds are offset - You have the gain or loss on disposal.

Amortisation ? Why would you even be thinking that? The sole way a property may reflect anything like amortisation is if a QS report allows deductions. Same with borrowing expenses for a income producing rental property (60month).

Its issues like this that mean a simple tax matter become messy and costly to fix all the mistakes.