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Edited version of your written advice
Authorisation Number: 1012712459291
Ruling
Subject: Buyer's agent fees
Question
Are you entitled to a deduction for the buyer's agency service fee you incurred under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer:
No
This ruling applies for the following period(s)
Income year ending 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
You engaged the services of a buyer's agent to assist with the purchase of a rental property.
You incurred expenses in respect of the buyer's agent services.
Relevant legislative provisions
Income Tax assessment act 1997 section 8-1
Income Tax assessment act 1997 section 110-25(3)
Reasons for decision
ATO Interpretive Decision ATOID 2003/361 considers these expenses and provides the relevant Commissioners view.
Section 8-1 of the ITAA 1997 allows a deduction for expenses incurred in the production of your assessable income except where they are capital in nature. The costs associated with the acquisition of an asset are considered capital in nature. Therefore they are properly considered under the capital gains tax provisions.
Incidental costs that can be included in the cost base of a CGT asset are set out in section 110-35 of the ITAA 1997 and these costs include remuneration for the services of a consultant as an incidental cost.
As you have incurred the consultant's fees in relation to the acquisition of your rental property, these fees are capital in nature and you are not entitled to a deduction under section 8-1 of the ITAA 1997, rather they will form part of the second element of the cost base of the rental property.