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September 20, 2024
Are Buyer’s Agent Fees Eligible for Tax Deductions?
Depending on your financial situation and goals, tax deductions can play a crucial role in your property investment strategy. Rather than being just a bonus, the ability to reduce your taxable income can significantly supplement your returns. This is especially true for negatively geared properties, where tax breaks are essential in making the investment financially viable.
Given this, it’s no surprise that many investors aim to maximize the expenses they can claim. While this approach makes sense, it’s essential not to misreport or overstate your expenses. A key aspect of this is knowing which expenses qualify as valid tax deductions and which do not.
Let’s take a closer look at one expense we know well—buyers’ agent fees. Many investors willingly pay this cost, but often aren’t sure how to handle it when tax time comes around.
Can I claim buyers' agent fees as a deduction?
Sure! Here’s the rewritten paragraph with the specified words unchanged:
The short answer is no, when purchasing an investment property, your buyer’s agent fees are not a claimable expense. This means they cannot be deducted to reduce your taxable income in the year you acquire the property. However, this doesn’t mean they provide no tax benefit – the advantage comes over the longer term.
Although buyers’ agent fees cannot be claimed immediately, they are factored into the cost base of your investment property. This is the total amount you’ve spent to buy and maintain the property, excluding any expenses already claimed. The cost base is crucial in determining capital gains tax on any capital growth you achieve from the property.
In other words, your buyer’s agent fees will play a role in tax calculations when you sell the property. Specifically, they will reduce the profits on which you need to pay tax. Depending on your financial situation and how much you paid your agent, this could result in significant savings.
Even if the sale of your investment property results in a capital loss, the fees will still be included in your tax calculations. In this case, they will increase the amount of the loss, which can be used to offset future gains, including in later tax years.
It’s important to note that this only applies to fees related to the purchase of an income-producing investment property. If you hire a buyer’s agent to assist in purchasing your own home, these fees are not tax deductible at any time, as the property does not generate income.
What other expenses can I claim?
Certainly! Here’s the revised version while retaining the specified words:
The good news is, that while buyers’ agent fees are not tax deductible, there are several other costs that are. These include:
Interest payments: If you have a mortgage on your investment property, a portion of your regular repayments will likely go toward interest. As this is considered an expense associated with the property, it qualifies as a valid tax deduction. Additionally, if you need finance to furnish or upgrade the property, the interest component of these repayments is also tax deductible.
Maintenance works: Occasionally, parts of your property or its fixtures may require repair or need to be replaced. The cost of these repairs is seen as an expense related to the property and can be claimed as a tax deduction. Similarly, any ongoing maintenance, such as regular gardening or a cleaning service, is also deductible.
Asset depreciation: Many fixtures within the property, including household appliances like fridges, ovens, and dishwashers, experience asset depreciation over time. For tax purposes, this depreciation is recognized as an expense and can be deducted annually. To claim these deductions, you’ll need a depreciation schedule, which details how much value each asset loses yearly. This schedule is typically prepared by an experienced quantity surveyor and is often included in the sale contract of a property.
Want more information?
Here’s a rewritten version with the required words unchanged:
Consult your accountant, as they can advise on which expenses you can claim and any additional tax you may need to address. They can also recommend effective strategies to minimize your tax responsibilities, which can be important for your financial planning.
If you don’t already have a trusted accountant, we strongly suggest adding one to your investment team. Not only can they ensure you meet all your financial obligations, but they can also provide advice on how to maximize returns. A great accountant will collaborate seamlessly with your financial adviser and buyer agent to help grow your portfolio.
If you need assistance planning your next step in your property investment journey, give Ash Buyers Agency a call. Our experienced team specializes in guiding investors from diverse backgrounds, helping them build wealth and secure their financial future through property. Whether you’re looking to add to your portfolio or enhance your current investments, we are here to help.
If you need assistance planning your next step in your property investment journey, give Ash Buyers Agency a call at +61 434 111 200 or send an email to info@AshBuyersAgency.com.au. Our experienced team specializes in guiding investors from diverse backgrounds, helping them build wealth and secure their financial future through property. Whether you’re looking to add to your portfolio or enhance your current investments, we are here to help.
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