stamp duty charged by your state/territory government on the transfer (purchase) of the property title
This stamp duty may be included in calculating the 'cost base' of the property for capital gains tax (CGT) purposes. For more information, refer to Guide to capital gains tax (NAT 4151).
stamp duty you incur when you acquire a leasehold interest in property such as an Australian Capital Territory 99-year crown lease (you may be able to claim this as a lease document expense)
insurance premiums where under the policy your loan will be paid out in the event that you die, become disabled or unemployed (this is a private expense), or
borrowing expenses on the portion of the loan you use for private purposes (for example, money you invest in a super fund).
If your total deductible expenses are more than $100, the deduction you claim for those expenses must be spread over five years or the term of the loan, whichever is less. If the total deductible borrowing expenses are $100 or less, you can claim the deduction in full in the income year you incur them.
Example
Peter took out a 25-year loan of $300,000 to purchase a rental property. Peter's deductible expenses were:
$800 – Stamp duty on the mortgage
$500 – Loan establishment fees, and
$300 – Valuation fees required for loan.
Peter also paid $1,200 stamp duty on the transfer of the property title for which he cannot claim a tax deduction. However, this expense will form part of the ‘cost base’.
As Peter's borrowing expenses are more than $100, he must claim them over five years from the date he took out his loan for the property. If that date was 3 July 2005, he would work out the borrowing expense deduction for the first year as follows:
3 July 2005 – 30 June 2006 (363 days)
Borrowing expenses
x
Number of relevant days in year
number of days in 5 years
=
deduction for year
$1,600
x
363
1,826
=
$318 deduction on his 2006 tax return
The borrowing expense deductions for each other year would be worked out as follows:
Borrowing expenses remaining
x
Number of relevant days in year
remaining number of days in 5 years
You need to keep proper records in order to make a claim, regardless of whether you use a tax agent to prepare your tax return or you do it yourself. You must keep records of:
the rental income you receive and the deductible expenses you pay – keep these records for five years from 31 October or, if you lodge later, for five years from the date your tax return is lodged, and
your ownership of the property and all the costs of purchasing/acquiring it and selling/disposing of it – keep these records for five years from the date you sell/dispose of your rental property.
For information about easy ways to keep your records, refer to 'asset registers' in chapter 3 of part A of Guide to capital gains tax (NAT 4151).
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