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Edited version of your private ruling
Authorisation Number: 1012547224413
Ruling
Subject: Property Lease document expenses
Question
Are you entitled to claim a deduction for lease document expenses?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
You jointly purchased a residential unit in a particular state in the year in which you commenced to reside in it as your main place of residence.
The vendor assigned the Crown lease over to you at purchase.
You paid stamp duty on the purchase in the same financial year.
You also paid legal expenses relating to the transfer at this time.
You occupied the property in that financial year and have treated it as your main residence since then.
It was your intention at that time to treat the property as your main residence for X years then move and let the premises out for a further X years, before selling the property. You still intend to do this.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 25-20(2).
Reasons for decision
Stamp Duty
Deductible expenditure
Section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can deduct expenditure you incur for preparing, registering or stamping:
(a) a lease of property; or
(b) an assignment or surrender of a lease of property; if you have used or will use the property solely for the purpose of producing assessable income.
A crown lease on property in the ACT satisfies a general law requirement of a lease in that leases in the ACT are granted for a definite period. Therefore, section 25-20 applies to allow costs incurred in the preparation, registering and stamping of a lease property in the ACT that will or has been held by the taxpayer for the purpose of producing assessable income.
The expenditure is allowable as a deduction to the extent that the property is used for the income producing purposes in that income year.
Where a property was acquired in the 2012-13 income year and only used for income-producing purposes in that income year, a deduction for the full amount of stamp duty under section 25-20 of the ITAA 1997 would be allowable.
Conversely where a property was not used for any income producing purpose in the year when the expenses were incurred no deduction would be allowable.
An apportionment of the relevant expenses can only be made where in the income year when the costs were incurred the property was used for both income producing purposes and non-income producing purposes.
As the legislation does not provide that the deduction be amortised over either a set period of time or for the duration of the lease it is implicit that the expense can be deducted only in the year that the expense is incurred.
In your case as there was no income producing use of the property in the year you incurred the expenses none of the lease expenditure is allowable under section 25-20.