Top End Tax of The Northern Territory Investment Property

Dear Internet Client

RE: Rental Properties

To ensure that you maximise your taxation claims for your rental property each year, I have listed some common deductions.

Advertising	For rental of the property
Agents Commission	For finding tenant or collection of rent, but not on sale of property
Bank Charges	If a separate rental account is kept all charges or a portion of charges if placed in a general account
Borrowing Costs	1/5 of the bank charges to start the loan are deductable each year
Depreciation	This includes all items that can easily be removed from the building, furniture, curtains, carpets, lino, air conditioners, some hot water units, stoves
Depreciation of Building	If the building was constructed after 18.07.85, a special building write off can be claimed.
Gardening	If you attend to the gardening, this would include the cost of travel, garden tools, fertilisers
Insurance	Building and contents, a public liability policy should also be considered
Interest
Legal Expenses	To do with lease preparation, collection of rents, but not the initial purchase of the property
Postage & Stationary
Rates	Council & water, excess water rates usually being the responsibility of the tenant's
Repairs	Repainting, electrical & plumbing repairs, replacing broken fences or windows are deductions. Replacement of a brick driveway with concrete, replacement of corroded steel pipes with more expensive copper pipes, would be considered improvements of a capital nature and not deductable
Telephone	To agents, tenant's, contractors for repairs.
Travel	Costs incurred in the management of the property are deductable, including motor vehicle costs and air fares. If there is a dual purpose in the travel ie. partly holiday, an apportionment of the claim must be made.

Purchase of property in joint names

Income and expenses on properties purchased in joint names must generally be split 50/50. It may therefore be beneficial to consider purchase of any future rental properties in only one persons name or through a unit trust to maximise tax benefits.

Stamp duty and legal costs

Although the purchase price, stamp duty and legal costs are not deductible when purchasing property, detailed records must be kept as all these outlays contribute to the cost base for capital gains tax, reducing the tax on sale of the property.

Depreciation of Building

Division 43 of the tax act allows for a annual deduction on rented premises based on the original constructions cost of the building.

Often this deduction is not taken advantage of because the original costs are not available from the builder or property developer. Where the original cost is not available an estimate prepared by a licensed quantity surveyor is acceptable. Costs to prepare these estimates have been gradually falling and can now be obtained for between $400-$600.

The write off is only available to properties constructed after 18.7.85, and if your property was constructed after this date, you should be able to take advantage of this deduction.

By way of example if your property cost $75000 to construct in 1990, you would be able to gain a deduction of $1500 per year, well and truly covering the costs of obtaining the estimate.

First check that your property was constructed after 18.7.85, then if you wish to take advantage of the building write off, contact me and we can discuss the information required.

Depreciation of Furniture & Fittings

What used to be a relatively simple procedure is now getting quite complicated. Firstly we need to establish what items are in the property that can be depreciated, and you should ask the real estate agent to provide this. Secondly we need to establish a fare value for the items given regard to it’s age and condition, and thirdly we need to elect what depreciation method to use, but this can left for the end of the year when we prepare your return.

I trust you find this information useful, and if you should have any queries or need any further information regarding the above, please do not hesitate to contact me.

Should you have any queries or need any further information regarding the above please do not hesitate to contact me at Top End Tax.

(08) 8972 2545 Fax (08) 8972 2455 Email Us mail@topendtax.com.au

(08) 8972 2545
Fax
(08) 8972 2455

Email Us
mail@topendtax.com.au