Canberra Inve. Property - tax treatment

I understand if someone buys property in Canberra (ACT) then due to the fact that it is just a lease (and not sale), the money paid for settlement etc can be claimed for negative gearing rather than capitalizing those costs.

I tried hard to locate this info on ato site but no luck.

Anyone has any info?

Rgds

Punter

 

Hi Punter,

You are (mostly) correct, but I don't think you will find anything explicitly on the ATO site about the ACT in this regard. Basically, the stamp duty on a lease is tax deductible in the first year, whereas the stamp duty on actual purchase (ie freehold) is not. As the ACT is all leasehold, you get to make a claim. Other borrowing costs, etc, are still split over 5 years as normal.

I have done this with an IP in Canberra, no problems. I can't give you tax advice, but look for something more generic on the ATO website about stamp duty on leases.

Dave

 

Do the leases automaticly roll over at the end of the period?

 

Hi Punter

Check out this ATO "Rental Properties 2007-2008" Doc:

Web Page:
Rental properties 2007-08

Document:
http://www.ato.gov.au/content/downloads/IND00133187n17290608.pdf

Look under: "Lease Document expenses"

 

I think everything in the ACT is on a 99 year lease (except for stuff held by the Commonwealth), after which there will be a renewal fee. All I've heard from REAs is that this will be a token amount. If not, I guess even the entrentched Labor Government might find itself in opposition. I guess we find out when the first leases hit 99 years.

It should be noted that not only can you claim the stamp duty on the lease, you can also claim some of the highest land taxes of any state / territory Canberra must have some of the highest rental yeilds in the country for the lowest actual returns. One advantage though is consistently low rental vacancy rates.

The Government is also looking at new laws so that they collect the interest on a body corporate's bank account to fund a new tribunal to ensure tenants in units are able to take matters direct to the body corporate instead of via their landlords / property managers. Not only will this add to the body corporate fees (loss of interest plus extra work), it has the potential to place landlords and body corporates at odds that end up at the tribrunal over what a body corporate might allow in the complex and what the landlord will allow in their unit (eg, pets).

So I wouldn't be tempted to invest here on the basis of being able to claim stamp duty. As always, look at all costs, possible claims, income and potential gains.

Dave