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¿ CAN I CLAIM THIS?
QIs staging a rental property for sale
a tax deduction? And what about
the advertising costs and marketing?
Can I claim those too?
AThe costs associated with selling
a property are capital in nature.
Advertising and marketing costs are included
in the cost base under Section 110-35(5)
(b) of the Income Tax Assessment Act. This
means they aren’t deductible against your
other income, only against the capital gain.
I’m not too sure what you mean about
staging. If this is hiring furniture etc. then
this is part of marketing so it’s included in the
cost base. On the other hand if it’s preparing
the property for sale by repairing it, then even
though it no longer has tenants, providing it
has earned rent in the financial year you incur
the repair expense and the damage relates to
the period it was a rental then you can claim
it as a tax deduction against the rent income,
according to Income Tax ruling 180.
Note, ‘incur’ means liable to pay for the
repairs even if you haven’t yet paid for them,
(i.e . told the tradesperson to go ahead).
Replacing something in its entirety isn’t a
repair, for example a complete new kitchen
rather than just new cupboard doors. A repair
isn’t deductible if you improve the property
beyond the condition it was in when you
If you have a tax question you’d like answered,
please send it in 100 words or less to
Julia Hartman is a CPA, registered tax agent
and founder of BAN TACS Accountants
This information is of a general nature only and does
not constitute professional advice. You must seek
professional advice in relation to your particular
circumstances before acting. This information is also to
be read subject to the disclaimer on page 6.
Tax Straight Up
with Julia Hartman
API’s resident tax expert
Julia Hartman has accepted
the challenge of every month
presenting a little known tax
trick in 60 seconds. Her time
DEPRECIATING INITIAL REPAIRS
Initial repairs are those that needed
doing when you purchased the property.
They aren’t tax deductible because
they improve the property beyond the
condition it was in when you bought it.
Many people think that all they’re good
for is increasing the cost base for capital
gains tax purposes. They can also be
depreciated under the Division 43 special
Repairs and maintenance not otherwise
claimed as a tax deduction can be claimed
under Division 43, providing they aren’t
specifically excluded (i.e. landscaping
costs). It doesn’t have to be structural to
qualify. For example, a repaint has just as
much right to be included under Division
43 as the original paint job.
Do not act on this information without
getting advice from your accountant.
æThe costs associated
with selling a property
are capital in nature.Æ
Difference between being
‘an investor’ and ‘in business’
The tax case YPFD vs Commissioner of Taxation Administrative
Appeals Tribunal (AAT) 2014 addressed many tax issues that will
interest property investors, writes accountant Julia Hartman.
Of particular interest to me was the question of whether the
taxpayer was in business or merely an investor.
Many have tried this argument and failed. For example, in Cripps
vs Federal Commissioner of Taxation 1999 Administrative Appeals
Tribunal of Australia 937, the taxpayers owned 14 townhouses and
other properties at various times. The Australian Taxation Office
(ATO) was successful in arguing they weren’t in business. The
foundation of the ATO’s argument was that they had an agent
managing the properties.
YPFD, as the taxpayer is referred to, owned, together with her
husband, only nine properties which were managed by a real estate
agent. Yet she was successful in arguing they were in business, not
Despite working full-time, she still spent a considerable amount
of time managing the properties, and due to the inefficiency of the
agents she had to do much of their job.
This case, if accepted as a precedent (it’s only an AAT case) could
help people with nine or more properties distribute the profit or
loss differently to the ratio shown on the title by entering into a
partnership agreement that distributes the loss to the high income
earner and when the circumstances change the agreement is
changed to distribute the profits to the low income earner.
It may also allow them
to borrow to repay
their equity, just as
businesses are allowed
a tax deduction when it
borrows to repay money loaned to it by the owners. This would be
fantastic for people who want to rent out their old home and take
their equity out to purchase a new home.
This case may even make it easier to transfer your residential
investment property into your self-managed superannuation fund
(SMSF), which can only happen when the property is used “wholly and
exclusively” in a business (i.e . commercial properties).
SMSF Ruling 2009/1 considers this is possible if you own 20 units
and your only work is managing those units.
You might consider using this case as a reference in a ruling
application, but certainly don’t jump into this sort of arrangement
without a ruling.
Strangely enough YPFD wasn’t interested in pursuing any of these
benefits. She was more concerned with being able to claim tens of
thousands of dollars for courses on property investing, payments
made to her husband for gardening and keeping tax records, interest
on money she borrowed from the family’s trust and many other
expenses she couldn’t substantiate.
The next edition of API will have a detailed analysis of this case, as
it’s a great example of some of the questions asked by new property
investors combined with some tantalising possibilities for well-
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