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Travel deduction

Discussion in 'Accounting, Tax & Legal' started by Here_To_Learn, 22nd Nov, 2005.

  1. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Here is my situation ...

    1) Travelled to QLD in June '05 to inspect IP.

    2) Purchased & settled IP in October '05.

    Accountant advised me that costs cannot be claimed as trip and settlement took place in different tax years. :confused:

    Anyone else had this experience ?
     
  2. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    I imagine that the June can be claimed, but not October - for the 04 - 05 year I imagine. Maybe that's what he meant?

    Mark
     
  3. Ol School Skata

    Ol School Skata Well-Known Member

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    My personal thoughts on this would be:

    The trip to your IP to inspect would be deductible if that was the sole reason for the trip & the property produced income during this financial year 2004/05 (also assumed you held this property during this financial year also)

    The trip to the IP you purchased in Oct 05 would not be claimable in the previous financial year (2004/05) and instead of it being tax deductible this year (2005/06) it would be added to your cost base of purchasing the IP, therefore offset any future capital gains. This would be treated differently because at the time of travel you were not earning income from it and you did not own the asset at the time you departed for the travel as you mentioned it was travel linked to purchase and settlement.

    But get real advice from your accountant on this... I am just giving you my unqualified opinion and how i treat my expenses similar to this

    Let us know what advice you receive

    OSS
     
  4. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Here To Learn,

    When you say you inspected the property in June, do you mean you came up for a property run? You hadn't actually bought the place yet?

    Mark
     
  5. robwil

    robwil New Member

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    Here To Learn.

    IMO, These costs would be part of purchase costs.

    And any inspections done after settlement and ip is tenanted would be claimable in the that tax year.

    Regards Rob.
     
  6. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Yes - this was a property run.
     
  7. Ol School Skata

    Ol School Skata Well-Known Member

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    ...having said that...

    Not tax deductible but are costs incurred in relation to the purchase of the IP so should be added to the cost base. But check with your accountant

    OSS
     
  8. NickM

    NickM Co-founder Staff Member

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    Sorry to spoil the party guys but this is often called "blackhole" expenditure.
    no income tax deduction and not part of the cost base.

    the ATO basic view is that if it is not available for rent then no expenses can be claimed.

    ATO ID 2001/535 & more recently

    ATO ID 2003/771
    Capital gains tax: cost base - travel costs relating to acquisition of property

    Issue
    Can a taxpayer, who purchased a property after travelling interstate to inspect a number of properties, include travel and accommodation costs as part of the cost base of the property under section 110-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?
    Decision
    No. Travel and accommodation costs incurred prior to the acquisition of the property cannot be included as part of its cost base under section 110-25 of the ITAA 1997.

    these extracts are on my website + some other rulings FYI

    http://www.strategicwealth.com.au/documents/ImportantRulings.doc

    Nick
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Of course if you were making a business out of trading property, it would probably be a different kettle of fish.

    ... but that's a very different kettle of fish, and not something most people would (or should) consider.
     
  10. Ol School Skata

    Ol School Skata Well-Known Member

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  11. eddievanhalen

    eddievanhalen Active Member

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    I'd be interested to know if NickM believes this "not claimable" rule also applies to a trustee inspecting prospective properties on "trust business". I believe one of the better know accountants on Somersoft (DGG) makes a distinction here between what is claimable for trusts and individuals

    Ed