Should I pay this invoice through LAQC?

[Charms]

Hi All,
Just completed remedial work that was picked up during builder's report done at time of purchase. Purchase price was reduced by the $5,000 that the work was quoted as costing. Do I now pay this through the LAQC account and then give that to the accountant to try and put through as a "loss". Property is still empty (has been since completion date of 3rd Oct), so already making a loss. Also expecting an invoice for extra work we decided to have done while property was empty... extra panels on deck, new doorknobs, fixed dishwasher runners etc. Can we also "claim" anything for that?
Will appreciate all advice. Thanks.Charms

[DamonH]

Although the exact figure is irrelevant, but for simplicity, presuming that you had spent the exact $5000 that the property was reduced by to get it up to standard then that expense is not a claimable expense but a capital expense. It is part of the 'purchase price' as such. You can only claim expenses that are to bring the property back up to standard of purchase or maintenance or disposable type items. Otherwise some one like myself that bought a cheap house (due to state) and spent 10s of thousands on it could claim all the 'improvements' whereas if I bought a completed house I would not. To take it to an extreme, you could not buy a bare section and claim all 'improvements' in building a $500k house on it.

This is just my understanding from my project. Some one more experienced will help more.

Even though I'm spending lots I'm not claiming against tax on much at all (just a few repairs that have been needed since purchase.)

But what you can do is depreciate those expenses if you have it set up for that. To do that you may still pay for it thought LAQC but I'm not using LAQC personally so haven't worked though that process.

[Charms]

Hi Damon,
Thanks for that. Be interesting to see what others say. Charms

[JohnL]

Yes, definitely pay all invoices through the LAQC. I suspect its a capital expense and will be added to your depreciation schedule, rather than be totally expensed in one year, but your accountant should handle it when doing the end of year accounts (unless you are doing the accounts yourself).

John

[Charms]

Thanks John. I am very new to this IP world and will definately be giving everything to the accountant to look at.

[ambitious]

Some simple things to bear in mind, once a property is acquired, for the purposes of renting, and all work that is done depends on whether it is capital works (material works) or ongoing maintenance (to bring it up to the standard that is reasonably required through normal wear and tear). In this case, as it has not been rented, I would say taht its capital works and has to be capitalised, ie costs to be claimed as depreciation writeoff. Yes, ok to pay via laqc, however, costs would be depreciated. Furthermore, once tenanted, all expenditure relating to maintenance would be straight expenses eg. fixing broken cupboard etc. Hope this clarifies. The wordings on the invoices is equally important, please confirm with accountant.

[Charms]

Hi Ambitious, thanks for that. Can you clarify "once,tenanted, all expenditure relating to maintenance would be straight expenses" How do I claim on "straight expenses"?

[whitt]

Ditto added to purchase price.
When tenanted it may be classed as maintenance or repair providing it is like for like and not an improvement.

[Jumpin]

It is good practice to pay all relevant bills and expenses via the LAQC account, as it is much easier to account for at the end of the year, and nothing gets lost.

[Charms]

Thanks for all the advice guys. I have now paid both the invoices through the LAQC account and will give it all to the accountant to sort. Thanks again.

[ambitious]

sorry, I was not able to reply earlier. "Straight expenses" - meant that it was normal maintenance exp rather then capital, but I note that this has been covered off already. All the best.