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  • Expenses for which you can't claim deductions



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Expenses for which you are not able to claim deductions include:

    • acquisition and disposal costs
    • expenses not actually incurred by you, such as water or electricity charges borne by your tenants, and
    • expenses that are not related to rental of a property, such as expenses connected to your own use of a holiday home that you rent out for part of the year.

    Acquisition and disposal costs

    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 – read the section Lease document expenses. However, these costs may form part of the cost base of the property for capital gains tax purposes. See also Capital gains tax.

    Example: Acquisition costs

    The Hitchmans purchased a rental property for $170,000 in July 2004. They also paid surveyor's fees of $350 and stamp duty of $750 on the transfer of the property. None of these expenses is deductible against the Hitchmans' rental income. However, in addition to the $170,000 purchase price, the incidental costs of $350 and $750, totalling $1,100, are included in the cost base or the reduced cost base of the property.

    This means that when the Hitchmans dispose of the property, $171,100 ($170,000 + $1,100) will be included in the cost base or reduced cost base for the purposes of determining the amount of any capital gain or capital loss.

    For more information, see the Guide to capital gains tax 2004–05.

    End of example
    Last modified: 02 Jan 2007QC 27603