Claimable Expenses

[rvrprop]

Hi All,

New to the forum.

Can you please let know what expenses i can claim under LTC and having two or more properties.

I have looked at the NZ IRD website and know the usual claim on rental:

• Insurance
• Interest
• Management fees

But what personal expenses one can claim as part of running LTC.

Appreciate the help.

[Wayne]

What personal expenses do you have?
Some claim for a home office but I think it is a stretch if you have someone else managing the properties.
You can claim legitimate mileage
No doubt an accountant will come on with a list.

[Rosco]

Hi,

You can claim expenses you incur in running your rental property business.

So obviously anything directly relating to the rentals, such as cleaning, power, property management, depreciation, accounting, legal, rates, repairs etc.

There might also be other costs such as phone, stationery, postage, bank fees, travel, internet, vehicle, where you could claim all, or a portion depending on your circumstances, or the actual costs incurred. There are different methods to claim for vehicle costs, and it depends on your circumstances which is best, and which is allowed.

Home office - If you have one or two rentals that are property managed, then you probably can't justify much of a claim.
If a claim is reasonable, then you look at the size of your office, storage, garaging for the rental business, and divide this by the total size of your house including garage. So you might have a 10m2 office, that you use 50% for rental business, and a 200m2 house, so your home office % would be 2.5%. You can then claim this percentage of the household costs.

My overall suggestion, is it is better to use a professional and get a Chartered Accountant who specialises property to help you, as tax law is complicated and for ever changing!

Ross

[rvrprop]

Hi Ross,

Thank you for the information.

I have just bought my 2nd rental and was thinking can I claim certain percentage of the household expenses.

I asked my accountant when I bought my first rental and he informed me that the claim is not justified.

Will question him again.

PS my friends over at the Auz can claim certain percentage if they have 2 more properties.

[Rosco]

As I put above, it is based on your use of your home for your rental business, not how many properties you have. We have clients with one property who we claim a home office claim for, because they have a real office they use for the rental, vs others with multiple rentals who we don't as they use a property manager and don't really use any space/office for the rentals.

So if you have an area in your home, that you use for your rental business, then work out the percentage or portion that you use this space for the rental business, then divide by the total area of your house. This will give you your home office %.

Ross

[artemis]

Read the IRD publications Rental Income and Depreciation.

[Wayne]

PS my friends over at the Auz can claim certain percentage if they have 2 more properties.

Aus rules really don't matter here!
Turn it around a little - have a look at what a claim would be worth verses having to argue the toss with the IRD.

[rvrprop]

Thank you all

[Gladdynook]

interesting re the home office claims. My accountant has from year 2013-2014 stopped claiming any home office expenses other than phone and internet (able to claim this as landlords/property managers need to be reasonably contactable at all times by tenants). He believes the IRD no longer allow this other than for trading companies (LTCs, Trusts etc do not qualify).

I'd be interested to hear if anyone else has come across this?

[Wayne]

How many properties do you have?
I don't know that the rules have changed - maybe your accountant realised they were a bit ambitious in the past?

[Gladdynook]

How many properties do you have?
I don't know that the rules have changed - maybe your accountant realised they were a bit ambitious in the past?

Eight, so I don't think it's anything to do with the quantity. He Simply said residential property investment no longer qualifies for home office expenses.

[Rosco]

Hi Gladdynook,

Residential property investment is a business, and it has the same rules.

If you legitimately use part of your home for your business, then you can claim a portion of the household costs.

A few property investors hugely overclaim (ie I have seen claiming 25% of house, when only one rental and property manager in place), but if you have 8 properties you are likely to have some kind of home office and therefore be entitled to some kind of a home office claim.

Ross

[Wayne]

Time for a new accountant Gladdynook?

[Gladdynook]

Hi Gladdynook,

Residential property investment is a business, and it has the same rules.

If you legitimately use part of your home for your business, then you can claim a portion of the household costs.

A few property investors hugely overclaim (ie I have seen claiming 25% of house, when only one rental and property manager in place), but if you have 8 properties you are likely to have some kind of home office and therefore be entitled to some kind of a home office claim.

Ross

thanks Ross, i'll have another word to them and see if they will change their position. Cheers!

[Damap]

It's usually easier to change to an accountant who knows what they are doing. You don't get paid to educate your professionals!