Tax Question: Deducatons for Property Management Business

cheapo patrol on 07/11/2020 - 00:11

Hi

I wanted to get some thoughts from the OzB community before seeking an accountant.

I am currently employed full-time working 40 hours a week. On the side, I have an investment property that I am running as a short-term rental through airbnb etc. It's grossing ~50-70% of what I earn each year. I also help manage 2-3 other properties of other people in terms of management, arranging cleaners etc. One property would be based in the same city I am in, the other three (mine included) are 250km away.

Ordinarily, I cannot claim my travel expenses to any of the properties as travel expenses for investment properties are not tax-deductible.

Given I have to process figured out, I am thinking of starting a short-term rental property management business on the side. I would register an ABN and trade as a sole trader/individual. I would create a website, market etc. as per normal. My logic and thinking is that the 3-4 properties, mine included, plus any other clients would then become part of the business. I would continue to generate income from my property as normal, and from other properties as a management fee.

If I was to go down this route, would my expenses - such as travel between the two cities, car expenses proportionate to business/private, marketing fees, cleaner fees etc - be tax deductible?

Financial

Comments

  • buckethat on 07/11/2020 - 00:32
    +4

    You're going to need an accountant anyway.. so just ask the accountant.

  • Willco88 on 07/11/2020 - 00:35

    If you register your own abn for your new venture I'm sure you can claim different things as part of your Job, I know generally you can claim like 300 per year but it may be different as self employed ABN, your best bet would be speaking to somebody who already has their own ABN or a tax accountant.

    • AustriaBargain on 07/11/2020 - 06:51
      -1

      You bloody well claim all your expenses when operating as a sole trader or as a corporation. Materials are expensive, websites, insurance, all the costs related to business you deduct from your income. Keep your receipts of course and anything that says tax invoice on it. If you're audited you'll need to prove every dollar of your deductions, potentially.

      • netjock on 07/11/2020 - 14:30

        Your post makes sense not sure why it is -1. Just goes to show how you can't trust wisdom of the masses.

  • miwahni on 07/11/2020 - 01:34

    You're in NSW, right? So you would have a property management licence. Expenses incurred in earning income in relation to that licence should be tax deductible, including the cost of licence renewal each year.

    • elgrande on 07/11/2020 - 06:47
      -1

      If op is running their own business I assume op also has a full real estate licence

      • miwahni on 07/11/2020 - 22:54
        +1

        One would hope so, however OP is "thinking" of registering an ABN….

  • JimmyF on 07/11/2020 - 10:37

    am running as a short-term rental through airbnb etc. It's grossing ~50-70% of what I earn each year

    WOW considering we are in a pandemic and lots had to closed down, you're doing pretty well to be earning that much from airbnb during a pandemic

    As for your question, get an account. All fees they charge are tax deductions.

    • netjock on 07/11/2020 - 14:29

      Percentages lie (is it gross or net, how much do you make), gross numbers also lie (before costs such as finance, council rates, water rates, land tax, body corporate).

      I've only manage to find magic money trees on the internet.

      • JimmyF on 08/11/2020 - 11:23

        Percentages lie (is it gross or net, how much do you make),

        You clearly missed my sarcasm… Most airbnb have sat empty this year.

  • Seraphin7 on 07/11/2020 - 11:07

    As with so many of these sorts of questions, it's not so much a case of "what" you can claim as it is the context of what you are claiming.

    For example, are costs incurred in operating a business deductable against the income earned by that business? Yes, of course they are.

    On the other hand, can you own an investment property, give the management rights to your own company and then suddenly charge all sorts of expenses through the management company that you wouldn't be able to get through as an individual? No, the ATO "looks through" these sorts of arrangements to the actual substance of what is going on.

    To cut to the actual chase of your question … will what you're proposing suddenly allow you to have a taxpayer-funded trip to your holiday house? No. Under an audit situation, it's likely that the ATO will see this for what it is, not allow the deductions, and hit you with penalties.

  • netjock on 07/11/2020 - 14:25

    I would continue to generate income from my property as normal, and from other properties as a management fee.

    If you are managing other people's property and generating an income, if you declare the profit you also declare the expense which includes travel. Don't let the ATO get off with that one.

  • cheapo patrol on 07/11/2020 - 16:53

    Thanks for the replies all - some interesting views.

    I live a few hours out of Sydney (and will be looking at generating gathering additional clients/management fees etc) from around me.

    My property, and the other few that I’m currently informally managing, are in a heavy traffic and noisy part of Sydney - they’re certainly not the first place I’d choose to go for a tax-payer funded trip to a ‘holiday home’ :)

    I’d be planning doing a fort-nightly or monthly trip back to Sydney to check the properties for damage etc and check-in with the cleaners. I’d then be forced to stay with in-laws unfortunately so wouldn’t be claiming any accomodation expenses when in Sydney.

    As you guys have said, I’ll definitely chat to the accountant about this one. Just wanted to see if anyone else had any experience or views in what I’m seeking to do, couldn’t find much on the net unfortunately

Login or Join to leave a comment
Login Join