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Tax and unrentable property

Discussion in 'Accounting & Tax' started by smallbuyer, 17th Oct, 2016.

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  1. smallbuyer

    smallbuyer Well-Known Member

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    WA
    What would people suggest from a tax perspective if someone had a house in an area that was completely unrentable? If attempts had been made for several years to rent the house but with no luck would it be ok to keep putting it down as a rental property with 0 weeks rented and claiming the deductions. The other option I see is added costs to the capital base.

    Would having a rental down with no income year after year likely attract ATO attention?

    Has anyone had a similar experience?

    Cheers
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    • Why is it unrentable?
    • Location?
    • Condition?
    • Price?
    • Owner expectations?
    • Unsuitable applications?
    • Inadequate marketing? (Eg shopping centre noticeboard 3 suburbs away, not continually advertised, signage)?
    • Poor agent?
    • Is it available for rent or is it your holiday home and you won't have anyone stay?
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Is it available for rent? Genuinely?
    Any holiday use?

    It sure would attract attention.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    It is unavailable to rent as it is defective. On that basis the costs of ownership are non-deductible as the general principle of s8-1 is not satisfied...There is no nexus to production of assessable income. Making it available to rent is more a expectation of hope or a charade for the ATO.

    The ATO look aggressively at rentals that arent actually rented - Some of the excuses taxpayers give make funny reading. One of the basis principles of property is that ALL property can be rented for a "market rate" if it complies with the expectations of the market. The rent may reflect demand or the condition. If it doesnt rent the reason may be the factor that also affects deductions. And in a recent case read the ATO asked the agent - He advised them the owner "didnt really want to spend any money to fix defects or make it tenantable"...So it wasnt really available for rent. The taxpayer in that case had two years of deductions denied.

    eg No plumbing. No power, No water., No road access, Uninhabitable etc

    Add the costs to the cost base.
     
  5. smallbuyer

    smallbuyer Well-Known Member

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    Location:
    WA
    Genuinely available but in a crap and dead country town with no tenants around.
    Advertised locally.
    Price is right.
    No used as a holiday home.

    It has issues with people breaking in and their has been a bit of damage and isn't in that great shape so that may create issues with the ATO.

    Think just adding to the cost base maybe safer.
     
    Last edited: 17th Oct, 2016
  6. Rob G

    Rob G Well-Known Member

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    Location:
    Melbourne
    Evidence of ongoing attempts to rent should suffice.

    Even a reasonable discount below the supposed 'right price' to ensure reliable occupancy and reduce the costs of repairs & insurance may be OK if predominantly to earn rental income. Base it on sound commercial judgement ... with evidence of reasoning.