rental

Rental property sale expenses – deduct or capitalise?

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Are you a taxpayer buying or selling a rental property?

When a taxpayer buys or sells a rental property the question that often arises is which expenses must be capitalised and which can be claimed immediately.

Its important for an property investor to understand how various purchasing and selling costs are treated for a rental property.

  1. Generally, costs incurred that are directly associated with the purchase or disposal of a rental property must be capitalised. Such costs include:
    • Purchase price of the property;
    • Conveyancing costs;
    • Advertising costs; and
    • Stamp duty.

     

  2. However, not all costs associated with the purchasing or selling of a rental property have to be capitalised but may be expensed immediately.
  3. Some of these expenses, of which some may be included on the settlement statement, include:
    • Council rates;
    • Water rates;
    • Body corporate fees; and
    • Adjustments to any of the above.

     

  4. As a result, when working out the capital gain or loss on the sale of a rental property, these costs need to be excluded from the cost base but can be claimed as an immediate deduction against rental income.
  5. Further day-to-day operating expenses incurred in running and maintaining the rental property are generally deductible in the year that they are incurred, and include costs such as insurance, cleaning, repairs and gardening expenses.

 

Remember: not all purchase and selling costs will have to be capitalised upon the purchase of a rental property.

Contact us if you require any clarification or advice.

 

This article was published on 02/12/2011 and is current as at that date

This article is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed in this article disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of the information or material in this article. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

5 responses to “Rental property sale expenses – deduct or capitalise?”

  1. Joseph says:

    Hi
    What about travelling costs associated with the purchase of a property for investment purposes. For example interstate airfare and car hire costs when buying a property in another state. Are these costs allowed to be capitalised as part of the capital cost of the asset?
    If not, are they allowed to be deducted from rental income?
    Thanks
    Joseph

  2. Bradford Garris says:

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    It is the little changes which will make the biggest changes.
    Many thanks for sharing!

  3. Jenny says:

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  4. Alison says:

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