Holiday home expenditure

by Jaimie Ruberto

If you bought a holiday home after August 20, 1991, that is not available for rent, you cannot claim a tax deduction for any expenditure related to this property.

However, some items of expenditure can be added to the original cost of the property. This could eventually save a lot in capital gains tax (CGT).

The cost base of a CGT asset comprises:

1. Money or property given to acquire the asset

2. Incidental costs of acquiring the CGT asset:

a. services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant, or legal adviser
b. transfer, stamp duty or similar duty
c. advertising or marketing (but not entertainment) to find a seller or buyer
d. valuation or apportionment to determine your capital gain or capital loss
e. search fees (such as fees to check land titles and similar fees, but not travel costs to find an asset suitable for purchase)
f. conveyancing kit (or a similar cost)
g. borrowing expenses (such as loan application fees and mortgage discharge fees)

3. Costs of owning the asset

These can include council rates, water rates, land taxes, body corporate fees, repairs, and insurance premiums. Non-deductible interest on borrowing to finance a loan for the CGT asset and on loans used to finance capital expenditure to increase an asset’s value are also considered third element costs.

If you have owned the property for a long time, you probably don’t have all these records on hand. However, you can contact the council, the water provider, the State Revenue Office, the body corporate and your insurance provider which should be able to provide a list of these expenses.

4. Capital costs to increase or preserve the value of your asset or to install or move it

These include costs for the purpose or the expected effect of increasing or preserving the asset’s value. i.e., costs of applying for zoning changes. It also includes capital costs that relate to installing or moving an asset of the property.

Capital costs of preserving or defending your ownership of or rights to the asset

Maintaining a record of these expenses can significantly reduce the CGT payable when you sell your property.