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Stamp duty deduction on a rental property

By 19 June 2014 8

Hi,

I’ve just purchased a rental property in Canberra and I am aware that, because I am leasing it on a 99 year lease, then the stamp duty is deductible in the 1st tax year as a “lease document expense”.

My question is regarding the other expenses (conveyancing etc) incurred in obtaining the property. Again, given that they were all incurred in ‘leasing’ (rather than buying) a property are they all deductible??

Many thanks in advance for any suggestions!

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8 Responses to Stamp duty deduction on a rental property
#1
Madam Cholet5:19 pm, 19 Jun 14

I wouldn’t think the lease factor has any bearing. It’s the expenses relating to an investment property, so fees incurred in financing, interest on the loan, rates, utilities. All tax deductible. If it wasn’t, no one would be doing it. My experience is only in NSW, but I can’t see anything in the tax stuff that provides for state by state rules.

#2
aaa1235:43 pm, 19 Jun 14

Madam Cholet said :

I wouldn’t think the lease factor has any bearing. It’s the expenses relating to an investment property, so fees incurred in financing, interest on the loan, rates, utilities. All tax deductible. If it wasn’t, no one would be doing it. My experience is only in NSW, but I can’t see anything in the tax stuff that provides for state by state rules.

You absolutely can claim the stamp duty on a leasehold property in the ACT because costs relating to preparing a lease are deductible. I have done the exact same thing. The conveyancing is also deductible as it also relates to the preparation of a lease. Other costs may be treated differently such as borrowing costs.

I think it is a bit of compensation toward the ludicrously high land taxes in the ACT.

I am guessing that the federal government hasn’t bothered legislating to remove this since it is pretty much only in the ACT so flies under the radar. I am sure it would be gone in a flash if it applied Australia wide.

The ACT govt would certainly have removed this a long time ago except they don’t care as it only affects federal revenue.

#3
Piratepete8:50 pm, 19 Jun 14

I think you are a little confused…. ACT properties are leasehold not freehold but you have still purchased the property. The 99 year lease has nothing to do with you renting out the property. If you have bought it as a investment property then you will be able to claim some of the expenses incurred in the purchase. You will have to also register for Land Tax with the ACT Revenue Office.

If you bought the property to live in yourself, it’s still a 99 year lease but you cannot claim any expenses.

#4
Garfield9:49 am, 20 Jun 14

People need to be careful providing tax advice here if they are not registered tax advisers (as they’re breaking the law), and people need to be careful taking tax advice from people who aren’t registered tax advisers (as you get no protections in case of mistakes).

My advice is if you aren’t 100% clear on what you can claim, make an appointment with a registered tax adviser.

#5
PoQ10:54 am, 20 Jun 14

Depends on what you mean by “claimable”. The stamp duty is part of the “cost base” of the CGT-liable asset – see https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-borrowing-expenses/?page=3 :

“…Stamp duty and legal expenses may be included in calculating the ‘cost base’ of the property for capital gains tax (CGT) purposes. For more information, see the Guide to capital gains tax (NAT 4151). For more information about legal expenses, see Rental properties – claiming legal expenses (NAT 71957)…”

So no, its not deductable against income, but against the capital gain when you eventually sell the property. Keep your reciepts for that much time.

#6
Mark of Sydney11:08 am, 20 Jun 14

Garfield said :

People need to be careful providing tax advice here if they are not registered tax advisers (as they’re breaking the law), and people need to be careful taking tax advice from people who aren’t registered tax advisers (as you get no protections in case of mistakes).

My advice is if you aren’t 100% clear on what you can claim, make an appointment with a registered tax adviser.

Not quite correct. It’s only illegal to provide tax advice without being registered (by the Tax Practitioners Board) if you do it for a fee or other reward.

That said, I agree that it’s risky to rely on gratuitous advice provided on forums such as this. But you don’t necessarily need a tax adviser. As a starting point consult http://www.ato.gov.au where there is a heap of information on residential property investment. For example:

“Generally you can claim an immediate deduction for expenses related to the management and maintenance of the property, including interest on loans.”

“You cannot claim a deduction for the costs of acquiring or disposing of your rental property. Examples of expenses of this kind include the purchase cost of the property, conveyancing costs, advertising expenses and stamp duty on the transfer of the property (but not stamp duty on a lease of property; see Lease document expenses). However, these costs may form part of the cost base of the property for CGT purposes.”

As the OP and the above para suggests, stamp duty payable on transfer of an ACT lease appears to be a special case:

“Lease document expenses

Your share of the costs of preparing and registering a lease and the cost of stamp duty on a lease are deductible to the extent that you have used, or will use, the property to produce income. This includes any such costs associated with an assignment or surrender of a lease.

For example, freehold title cannot be obtained for properties in the Australian Capital Territory (ACT). They are commonly acquired under a 99-year crown lease. Therefore, stamp duty, preparation and registration costs you incur on the lease of an ACT property are deductible to the extent that you use the property as a rental property.”

#7
JC11:35 am, 20 Jun 14

Lots of missinformation above.

The rules that apply in the ACT are different to elsewhere due to the lease arrangement. This means stamp duty IS a first year deduction.

What happens in NSW or elsewhere is not relevant.

Source: 3 para of this ATO webpage.

https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-borrowing-expenses/?page=3

#8
dungfungus12:22 pm, 20 Jun 14

JC said :

Lots of missinformation above.

The rules that apply in the ACT are different to elsewhere due to the lease arrangement. This means stamp duty IS a first year deduction.

What happens in NSW or elsewhere is not relevant.

Source: 3 para of this ATO webpage.

https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-borrowing-expenses/?page=3

Also, in the ACT, leases cannot be held in the name of a trustee. If you acquire an investment property with your SMSF the lease will have to be in the names of the trustees only without any reference to “as trustees for XYZ Superannuation Fund”.

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