Is a building inspection tax deductible if I didn't buy the house? Ask Margaret

Is a building inspection tax deductible if I didn't buy the house? Ask Margaret
Is a building inspection tax deductible if I didn't buy the house? Ask Margaret

Hi Margaret,

I have just bought an investment property, which included doing a building inspection.

But prior to buying the property I also had a building inspection done on another property that I was looking to get as an investment which I did not go ahead with.

Are both building inspections tax deductible or just on the one I bought please?

With thanks

Geoff

Hi Geoff,

When buying an income producing property, the expenses which are associated with that are treated differently, depending upon what the expenses were and when they were incurred.

Where a building inspection is concerned, this is considered what we call a 'capital cost' and it is claimed by adding it to the cost base.  This means that you do not get an immediate deduction for it (as in, you cannot claim it in the year that it was incurred to get some of your tax back ion that year) - rather, it adds to your cost base and essentially reduces the gain you have to account for when you sell, reducing the amount of capital gains tax you must pay.

If you do not buy the property, you have no cost base to add it to so it is not claimable at all.

If you want to claim these kinds of costs, you must be in the 'business of buying rental properties' or in the 'rental property business'.  If your are assessed as being in one of those categories, then there are many extra things you can claim, but you will be treated like a business with all of the associated requirements and lose the 50% discount on CGT when you sell.

Regards,

Margaret

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Margaret Lomas

Margaret Lomas

Margaret Lomas is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and Your Money, Your Call, both on Sky News. She is the founder of Destiny.

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