ATO Interpretative Decision
ATO ID 2001/796 (Withdrawn)
Income Tax
Deductibility of Rental Property Advertising ExpensesFOI status: may be released
-
This ATO ID is withdrawn from the database as the ATO view is contained in the Tax Office publication Rental properties (NAT 1729).This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a deduction available under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for advertising expenses related to the sale by auction of a rental property?
Decision
No. Advertising expenses related to the sale by auction of a rental property are not an allowable deduction under section 8-1 of the ITAA 1997 as the expense is of a capital nature.
Facts
The taxpayer owned a rental property. The rental property was vacant for a significant period of time with little prospect of finding a tenant. During the period that the rental property was vacant, the taxpayer engaged the services of a selling agent for the express purpose of selling the property by auction. The taxpayer incurred expenses related to engaging the services of the selling agent.
The property failed to sell at the auction. However, in response to advertisements placed by the selling agent, a prospective tenant later came forward and subsequently took out a lease over the rental property.
The taxpayer wants to claim a deduction for expenses related to engaging the services of the selling agent.
Reasons for Decision
At the time that the taxpayer engaged the services of the selling agent, the taxpayer's intention was to sell the rental property. The fact that the advertisements placed by the selling agent enabled the taxpayer to find a tenant for the property is merely coincidental. It was not the intended purpose of engaging the selling agent.
Any profit arising from the disposal of a rental property is a capital gain and any expenses related to that disposal are of a capital nature. Paragraph 8-1(2)(a) of the ITAA 1997 provides that you cannot deduct from your assessable income any expense that is of a capital nature. As the cost of engaging the selling agent was of a capital nature, a deduction for that expense is not available under section 8-1 of the ITAA 1997.
Date of decision: 24 May 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Keywords
Deductions & expenses
Advertising & promotion expenses
Selling expenses
Rental expenses
Rental property
ISSN: 1445-2782
| Date: | Version: | |
| 24 May 2001 | Original statement | |
| You are here | 25 July 2008 | Archived |