Deductible rental costs?

Question from Jo updated on 15th May 2014:

Exactly which expenses to do with the purchase of a rental property are tax deductable? Inspection report? Registered valuation? LIM? Legal fee? How about the deposit paid to the bank?

Our expert Mark Withers responded:

To be deductible, a cost needs to have a nexus with income so it needs to be necessarily incurred in earning the rent, not be of a capital nature and not be private or domestic. At acquisition, costs can be seen as being related to the acquisition of the capital asset, the property itself. Where this is the case the costs must be capitalised. Generally, legal fees under $10,000 will be deductible and costs associated with gaining finance, such as valuation fees will be deductible. Ironically, if a taxpayer is in the business of property investment and incurs costs in relation to a property they don't end up buying, these costs may be deductible but if the property is actually purchased these same acquisition costs will then generally be required to be capitalised to the acquisition cost.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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