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Only if the lawyer was doing the survey.
They are totally different lol
Well it could certainly be argued that the surveying costs were part of the legal fee encumbered in order to establish the legal land entity regarding the boundaries..
Well it could certainly be argued that the surveying costs were part of the legal fee encumbered in order to establish the legal land entity regarding the boundaries..
A very difficult argument I would think.
Surveying may be required but it isn't legal work.
Read the definition
A very difficult argument I would think.
Surveying may be required but it isn't legal work.
Read the definition
The most important part of the statement from IRD is :"" This applies even if the legal expenses are capital in nature, as long as the expenses have a sufficient connection with deriving assessable income""
In this instance from the original posted it is clear that the surveying costs which establish the legal entity of the land are sufficiently connected in essence to deriving assessable income. If a technicality exists because the survey was not a legal fraternity, one option is to get the lawyer to charge the surveying fees as part of his or her legal bill , that should then provide the necessary bureaucratic stamp that may or may not be required by the powers that be.
In essence the IRD must seen to be operating fairly and reasonably .
The most important part of the statement from IRD is :"" This applies even if the legal expenses are capital in nature, as long as the expenses have a sufficient connection with deriving assessable income""
In this instance from the original posted it is clear that the surveying costs which establish the legal entity of the land are sufficiently connected in essence to deriving assessable income. If a technicality exists because the survey was not a legal fraternity, one option is to get the lawyer to charge the surveying fees as part of his or her legal bill , that should then provide the necessary bureaucratic stamp that may or may not be required by the powers that be.
In essence the IRD must seen to be operating fairly and reasonably .
Legal expenses are seperated out buy this - it doesn't create any obligation to include anything else that you may consider 'like'.
I wondered how long it would take you to suggest getting the lawyer to engage the surveyor.
By the same token could you get the lawyer to get a couple of boundary fences built?
Or a house?
I'll leave you to discuss this with the IRD, good luck!
Legal expenses are seperated out buy this - it doesn't create any obligation to include anything else that you may consider 'like'.
I wondered how long it would take you to suggest getting the lawyer to engage the surveyor.
By the same token could you get the lawyer to get a couple of boundary fences built?
Or a house?
I'll leave you to discuss this with the IRD, good luck!
The survey represents the "legal entity " of the land. Totally different from a boundary fence which in any case is able to be taxation offset against rental income as long as it is costed out in a chattels valuation. Not everything is black and white in taxation law , many "reasonable arguments" for consideration are put forward and are often fought out in court on a case by case basis .
I think the definition is very clear. Legal expenses are defined as fees for legal services rendered by a person who holds a practising certificate issued by the New Zealand Law Society or an Australian equivalent only.
#1 - Are total legal expenses for the year under the $10k threshold? If not, all expenses have to undergo the capital tests.
Maybe, not clear from the post. But lets assume yes.
#2 - Are you being billed by someone who holds a legal practicing certificate? If not, it's not legal expenses.
In this case, you're suggesting having the surveyer bill the lawyer, and the lawyer bill you. You might be able to swing that as a yes.
#3 - Is the work 'legal services'? (ie, you can't have a lawyer do your landscaping and then claim it)
My guess is that this is defined somewhere in the Legal Services Act 2011 (but I could be wrong, have never read that Act) and it'll exclude work that is simply organised by your lawyer and oncharged to you. That's a guess. If it's not defined anywhere, you may well have your case.
Not everything is black and white in taxation law , many "reasonable arguments" for consideration are put forward and are often fought out in court on a case by case basis .
In the last 10 years, the IRD has won the vast majority of these reasonable arguments. I don't like your chances.
Good news is, the payments you make to your lawyer to fight the IRD in this case? Those will almost certainly be deductible. Very little doubt in my mind.
The survey represents the "legal entity " of the land. Totally different from a boundary fence which in any case is able to be taxation offset against rental income as long as it is costed out in a chattels valuation. Not everything is black and white in taxation law , many "reasonable arguments" for consideration are put forward and are often fought out in court on a case by case basis .
Have fun in court then.
You know you are stretching it, I don't know why you bother continuing.
I think the definition is very clear. Legal expenses are defined as fees for legal services rendered by a person who holds a practising certificate issued by the New Zealand Law Society or an Australian equivalent only.
#1 - Are total legal expenses for the year under the $10k threshold? If not, all expenses have to undergo the capital tests.
Maybe, not clear from the post. But lets assume yes.
#2 - Are you being billed by someone who holds a legal practicing certificate? If not, it's not legal expenses.
In this case, you're suggesting having the surveyer bill the lawyer, and the lawyer bill you. You might be able to swing that as a yes.
#3 - Is the work 'legal services'? (ie, you can't have a lawyer do your landscaping and then claim it)
My guess is that this is defined somewhere in the Legal Services Act 2011 (but I could be wrong, have never read that Act) and it'll exclude work that is simply organised by your lawyer and oncharged to you. That's a guess. If it's not defined anywhere, you may well have your case.
In the last 10 years, the IRD has won the vast majority of these reasonable arguments. I don't like your chances.
Good news is, the payments you make to your lawyer to fight the IRD in this case? Those will almost certainly be deductible. Very little doubt in my mind.
I don't have any situation like that, but if it did come about then it may be worth considering a court battle..As regards legal expenses no need when i can adequately represent myself. Clearly some IRD practices have been overturned as can be seen by their having to reconsider many things. The courts are there to uphold IRD to be fair and reasonable, your comment that the IRD have won the vast majority of these cases is somewhat self defeatist and that is not how our society and its tax obligations can progress. As an example of where they have had to revise tax code because they were incorrect , the deduction of legal fees is now allowed as are amendments that relied on their incorrect advice. Under the heading, legal fees this is stated on their website:
We previously advised on this page and in other material that you can’t claim legal expenses incurred as part of buying a rental property unless you are in the business of renting properties. Inland Revenue has now determined that this is incorrect. If you relied on our previous advice, you can request an amendment to an assessment under section 113 of the Tax Administration Act 1994. Please see SPS 16/01 – Requests to amend assessments for more information on section 113 requests.
Last edited by mrsaneperson; 31-08-2018, 11:20 AM.
Self defeatist? Not at all. I'm not the one looking to challenge 60+ years of case law around the capital/revenue distinction, against a well-resourced government entity that has a great track record of winning for the last decade. I'm being 'you-defeatist'.
The legal fee exception to the capital law is an anomaly, where the IRD/Legislature is being generous allowing deduction for what is by any measure clearly a capital cost. I don't see any reason to try and push that lenient view to encompass more stuff.
[QUOTE=Anthonyacat;435248]Self defeatist? Not at all. I'm not the one looking to challenge 60+ years of case law around the capital/revenue distinction, against a well-resourced government entity that has a great track record of winning for the last decade. I'm being 'you-defeatist'.
The legal fee exception to the capital law is an anomaly, where the IRD/Legislature is being generous allowing deduction for what is by any measure clearly a capital cost. I don't see any reason to try and push that lenient view to encompass more stuff.[/Q
Generous deduction? LOL ..Landlords have had profit margins squeezed out of the residential rental sector for many years by IRD, especially when building depreciation was scrapped ; Taxcindas new socialist government looks to be implementing measures that are even more draconian than previous ones, possibly wiping out mortgage interest as a deductible expense. Taxes in NZ generally are too high in comparison to many other countries, your comments aid this unfortunately through lack of critical approach in batting for clients to pay as little tax as legally possible. Having a stance that says the IRD is generous in regards to legal fees limited to 10k is ludicrous, as they should not be considered as capital, but as an operational cost that cannot realistically be onsold or recoverable .
Another example of your so called "generous" IRD policy is in regards to earthquake strengthening measures costing hundreds of thousands of dollars required for older commercial buildings that owners were forced to pay due to geological forces out of anyone's control, yet forcibly implemented under government regulation .As if these huge costs were not already a substantial burden for building owners caught up in the earthquake calamity zone they were then callously and unfairly regarded as capital expenditure by IRD and therefore unable to be deducted as a taxable expense .
Maybe you should be working for IRD instead, as you already appear to be doing so ?
I agree that landlords have had margins squeezed by unfair changes such as the scrapping of depreciation and ringfencing of losses. I've not heard anything serious about wiping out mortgage interest deductibility, but they do that in the UK so it may well be on the table. I also agree that our taxes are a bit high - though our absense of a comprehensive capital gains or estate tax speaks against that. Both of these points are irrelevant to whether the laws around capital/revenue distinction operate as they should.
I also never said that IRD policy was generous in and of itself. The earthquake strengthening is a significant point of contention. While anyone knowingly buying a building that requires strengthening should clearly have no claim, people who owned it before the issue surfaced should in my opinion be eligible for partial or full deduction. But again, this is all irrelevant to the topic at hand.
Legal fees for purchase/sale of a property are not an operational cost. They are a cost of obtaining an asset, and thereby capital. Just like installation costs for machinery at a business, or delivery charges for your new lounge suite. Lack of recoverability is not and has never been one of the tests for capital expenditure. The current legislation is generous in that it allows deduction for what is otherwise clearly capital.
I support my clients in the occasional aggressive tax position. We have not had to defend any yet, but it'll surely come some day. But it would be incredibly irresponsible to go ahead gung-ho without warning them when I think it will be a tough one to win.
But I think I may step out of this discussion, doesn't feel like I'm likely to make much headway, and I've got way too much to do right now to justify arguing on the internet!
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