The things people say...

Discussion in 'Property Management' started by Lil Skater, 10th Aug, 2016.

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  1. Lil Skater

    Lil Skater Well-Known Member

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    I hear this ALL the time from PM's complaining that the owner won't spend extra on something because it's tax deductible after all. I think they get confused between deduction and refund.
     
  2. JohnPropChat

    JohnPropChat Well-Known Member

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    As ATO calls it Deduction vs Rebates (offsets)
     
  3. Big Will

    Big Will Well-Known Member

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    Yeah my toilet gets confused if I hit both buttons at the same time. :rolleyes:
     
  4. wategos

    wategos Well-Known Member

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    Well, I believe I am correct in many respects, repairs to a property in the first year of ownership can be heavily scrutinised by the ATO. Better to wait until after at least a year of rental. Plenty of info out there regarding this.
     
  5. Azazel

    Azazel Well-Known Member

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    Initial repairs (something that was wrong when you bought the property) aren't claimable as a normal repair.
    And yep, ATO could get on to it.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Did she make sure that she didn't mix solids with liquids either?
     
  7. Perthguy

    Perthguy Well-Known Member

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    Every property I have ever rented out has had required repairs in the first 12 months and I have never been questioned by ATO. But I am talking about genuine repairs here.

    If you buy a house with a falling down fence, replace the fence and claim it as a repair, that is wrong and ATO would be right to question you about it.

    Or if you replace your air-con and call it a repair, that is wrong and ATO would be right to question you on it.

    Normal repairs of things that break during a tenancy are certainly claimable within the first 12 months with no issues.
     
  8. Tranquilo

    Tranquilo Well-Known Member

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    Guy in the Gym said to me the banks won't lend money unless it was negative gearo_O
    I'm going to ask him where to buy next:p
     
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  9. Brady

    Brady Well-Known Member

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    Haha alright @Colin Rice so guess who came back in today - asking for a few more thousand dollars. I'll give it to her that it was today when the rates dropped. But still!

    She also asked for a job here, wanted to see the manager (again, we have had a couple over the last 2 years) because she doesn't get through the screening process to an interview. Needless to say don't think she's that financially savvy.
     
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  10. Azazel

    Azazel Well-Known Member

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    They are.
    But if it's something that needs fixing and you are aware of it when you buy it, that's not valid.
     
  11. Perthguy

    Perthguy Well-Known Member

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    Correct. I think that's where the confusion is coming from. So,

    Expenditure incurred on an initial repair after property is acquired, if the expenditure is incurred in remedying defects, damage or deterioration in existence at the date of acquisition, is capital expenditure and is not, therefore, deductible under section 25-10. This is so whether the property is purchased or obtained under lease or licence by the taxpayer. The cost of effecting an initial repair is still not deductible even if some income happens to be earned after acquisition but before the repair expenditure is incurred: but see paragraphs 63 to 66 of this Ruling in relation to dissecting or apportioning initial repair costs.

    Legal database - View: Rulings: TR 97/23

    This has nothing to do with repairs being required in the first 12 months. It is relavant as to whether the item needed repair at purchase or whether it was working at purchase and subsequently needed to be repaired. Which is why I think this statement is completely wrong:-

    Example 1:- I buy a house with an air-con that is not functioning. This is noted on the contract of sale or in the building report. I have the air-con repaired. The repair is capital expenditure and should never be claimed as a repair.

    Example 2:- I buy a house with a working air-con. I find tenants and they move in. A couple of months later, they report the air-con is not working. I have it repaired (not replaced). The repair is deductible. Note that if I replace the whole unit, this is not a repair.

    I think this is fairly clear:-

    Initial repairs and capital improvements
    Initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property are capital expenditure and may be claimed as capital works deductions over either 25 or 40 years, depending on when the repairs were carried out.

    Capital improvements (such as remodelling a bathroom or adding a pergola) should also be claimed as capital works deductions.

    Note: A common mistake is to claim initial repairs or capital improvements as immediate deductions.
    Rental properties - avoiding common mistakes | Australian Taxation Office

    This fairly nicely sums up what I have claimed in the past with no issues:-

    If repair costs are attributable either to damage that occurs during the taxpayer's holding, etc., of the property for income purposes or to defects that emerge suddenly and mature during that time, a deduction is allowable if the other general principles stated in this Ruling are satisfied.
    Legal database - View: Rulings: TR 97/23

    I should also note that landlords are required by their lease agreement to keep the premises maintained in a good working order. A landlord should never breach their contract because they are worried about being questioned by the ATO.
     
  12. hash_investor

    hash_investor Well-Known Member

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    Property investment is all fake money, rising values mean nothing but equity on paper.

    As everything is not paper equity as well.
     
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  13. brettc

    brettc Well-Known Member

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    Haha. That's a very good point and I must admit I didn't delve in to the details.
     
  14. Perthguy

    Perthguy Well-Known Member

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    True, until you sell at the higher price ;)
     
  15. hash_investor

    hash_investor Well-Known Member

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    things people say.... :)
     
  16. Perthguy

    Perthguy Well-Known Member

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    I am speaking from personal experience :)
     
  17. Perthguy

    Perthguy Well-Known Member

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    Duh! I just got it. I'm slow today! :D
     
  18. Azazel

    Azazel Well-Known Member

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    Kind of. But it's nice to be able to buy another house with that fake money.
     
  19. Perthguy

    Perthguy Well-Known Member

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    Haha. Someone said on here the other day: better save up for a deposit! Me: what's a deposit? :D

    Things people say.
     
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  20. Charlotte30

    Charlotte30 Well-Known Member

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    Things people say.

    I was out socially a while ago and was asked what I had been doing. "Looking at some property" was my response. Another from the group said incredulously, with one eyebrow raised "Haven't you got enough property?". I said "always looking" and changed the subject.
     
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