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Deposit bonds for IP

Discussion in 'Real Estate' started by gonz_7, 28th Jan, 2010.

  1. gonz_7

    gonz_7 Member

    Joined:
    5th Mar, 2009
    Posts:
    8
    Location:
    Canberra, ACT
    Hi all

    I understand that certain costs associated with purchasing/selling an IP (real estate commission, stamp duty, legal fees etc.) are not deductible but can be used to reduce the cost base when calculating CGT liability post sale.

    Does anyone know if the fee associated with a deposit bond falls into the same category? I figure it should given it's a cost in acquiring an income producing asset, but just wanted to see if anyone out there knew for sure.

    Thanks
     
  2. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    My understanding is that the fee for a deposit bond are treated similar to acquisition costs and form part of the capital base and are not deductible for income purposes.

    I am not a tax specialist so it is better to check with a competent tax accountant who deals with property investors.
    Greg
     
  3. KateMelb

    KateMelb Active Member

    Joined:
    17th Apr, 2010
    Posts:
    33
    Location:
    Melbourne, Victoria
    Hi Gonz,

    Yes, this should be a purchase cost that is deductible upon disposition of the property, as is mortgage insurance and buyers advocate fees in addition to the other items you've listed.

    Happy to recommend a good accountant if you wish, if so please PM me.
     
  4. D&K

    D&K Well-Known Member

    Joined:
    14th Nov, 2005
    Posts:
    206
    Location:
    Canberra
    Hi Gonz_7,

    I didn't spot this earlier but I note that you're from Canberra, where everything is lease-hold. Stamp duty on a lease is deductible in the first year, which applies to ACT property if buying there and helps with the first tax return! This is distinct from borrowing costs, which may be claimed over the first 5 years or go into the capital base - can't recall.

    Cheers, Dave