Tax deduction for NRPT

my tax man asked me a few questions about it as well,  but im pretty sure he did include it in there for me. not sure if he was able to claim the full amount though sorry.  interested to hear from others !!

Disclaimer - I am not an accountant, nor accountant trained. Just my personal advice.

the issue about the tax deduction is about your primary source of income. I (like most people here I assume) work full time and investing is something we do to hopefully stop having to work for the man!

Because my investing does not contribute directly to my source of income, there is no direct link from the course to my work - I could not claim it as a deduction. There most be a tangible link between the course and your income. This means that no one answer will work for this topic as each persons situation is different.

If your primary income is from your properties (then congrates to you and I am envious) then you could easily draw a direct link from your income to the course. That is, you are improving your ability to make more money from your primary source of income.

Now this does not mean you could not have the course as a tax deduction. It means you cannot have the course as a tax deduction against your own income. Confused?

This leads to a very interesting discussion about being structured correctly. If you had a Trust Fund that purchased the property, then the cost of the course could be an expense to the Trust Fund to ensure that is what providing the best investment advice and training to the Trustee. (You would need to discuss with an accountant)..... or even better...

Own your own company and have the company pay for the course. This is what I did and I believe it works very well to cover many expenses that are not tax deductable. Think about this.... these are not (in my or my accountants opinion) tax deductions.

travel to look at a potential investment (meals, accommodation, tolls, fuel etc) are not deductable because they are not income producing (you dont even own it yet),
Phone Calls to agents,
Internet time for searches,
Renovations overheads

None of these things are claimable against your primary income. But a company that is created to do the investing for you, these things would be deductions.

I purchase my investments in a trust with a corporate trustee (my partner), but I also own a company (I am the director) and the company provides property and project management services. I charge the trust (property owner) fees to do all sorts of activities  - renovations, developments, staging, property management (yep I charge myself a 8% property management fee to manage my own properties). This helps to flow money from the trust to the company at a lower tax rate than I am on. There are lots of other reasons why that i won't go into here.

The company, like any company has a responsibility to its emplyees (me) to be trained and up to date in property investing. Therefore this course was paid for by my company (Thanks company your great employer). But lets take this one step further. It is my company that goes and looks at properties to invest and recommends to the trust fund which ones to buy. (Travel is now a company deduction).

Phone calls I make (company phone, paid for by the company) are now all decutions. Heck even the phone cost is now a deduction. Internet subscription is by the company.  Well I think you get the picture. Eventually, when I get my own place - I will lease a part of my house to my company to use as its office and the rental fee will be tax deductable.

A company structure works for me (EVERYONE HAS THEIR OWN REQUIREMENTS). I cannot stress this enough. This works for my situation and you will need to get independant legal and accounting advice.

I am happy to provide more information if people have questions, but there is real financial power in making sure you are structured correctly based on your investing goals and strategies to use. My focus is subdivisions, developments, splitters and strata's so it works for me. having one or two buy and holds may not be worth the hassle or expense to you.

I hope this is helpful. When I get any feedback from my accountant that is contradictory to this I promise to update the webpage to keep it accurate.

Dean

Thanks Dean.
I too have used a company in the way you do :-)
I have also been empolyed in the building industry for the past couple of years and am now a Licenced Real Estate Agent, so I think (Im not an accountant either) that I can claim this course as part of my job training, I also do developments and buy build and sell trading.

Structure is so important, I also think we should understand how our structures work, I see a lot of people who have no idea how the structures they have work.
That is a little scary to me, as when you sign the forms you take responsability even if the accountant does it all and tells you what to do. 

thanks again for sharing 

My accountant explained that you can only claim education expenses that are contributing to your income (ie cash flow not capital gain). We agreed that half the course was teaching me about cash flow and half was teaching me about capital gain, so we claimed 50% of the course cost. 

Hey Michelle - I agree, I cant see why it could not be expensed against your real estate company as on job training. I am still waiting for my accountant to qualify. I was looking into gaining a RE Agent licence as part of my company too but have not got around to it yet. I noticed that ASIC or the ACCC have changed the ways you gain a licence now which will add another level of frustration (and delay) in achieving that :)

Hey Glen - I learnt primarily from asking questions of my accountant until I had it in my head. There are also websites that offer advice on trust/company structures. I just threw myself into the unkown each lunch hour at work until I had it sorted and any time something came up I asked my accountant. Because I had my accoutnant opened the trust, the deal was the any advice or questions I have about it are part of the set up fee. Let me tell you she worked for her set up fee!

After I made the post above, I also noticed there is a trust / company section in the apprecnticeship notes, so they are worth a read as well.

Hey Jane - I agree in part. Which is why I did not claim the course as a tax deduction, because I had little cash flow at the time to write it against. I claim the cost of the course as a company expense in educating and training my employees (me) within the company. So it is not a personal tax deduction, but a company expense that I can use against company income. Slight difference. I tried to draw this particular point out in my post, ie personal tax claims versus company expenses.

Interesting interpreation though from your accountant (and I reckon we would get 100 different views from 40 different accoutants. For me, my accountant said that you cash flow income is insignificant compared to wage at the moment so there was no direct link established at all for a Tax deduction even 50%. 

Still waiting feedback from the accountant on all of this.

Dean 

As promised, I said I would update once my Corporate accounts had been completed by my accountant.

I claimed the course as a company deduction (expense) through the company as Staff education and training (along with all the other training activities). Although not a tax deduction, it contributes to the expenses for the company thereby reducing the amount of income received (reduced income = reduced profit = less tax).

The other advantage is that the Company Losses can be carried forward into the next FY, so when we finally sell the current reno/sub division the cost of the course and training will reduce the amount of profit recieved. Essentially this means the profit from the investing will pay for the course. Not me.