Taxation Law: Deductions for Rental Property Expenditure

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to Part A:.......................................................................................................................2
Answer to Part 2:........................................................................................................................5
Reference List:...........................................................................................................................7

2TAXATION LAW
Answer to Part A:
According to “section 8-1 of the ITAA 1997” an individual under the positive limbs
is allowed to claim an allowable deductions relating the expenditure that is occurred in
gaining the taxable income1. According to the Australian taxation office an individual is
allowed to claim deductions relating to the certain expenditure that is incurred on rental
properties when the property is rented out. However, an individual is not allowed to claim
deductions relating to the expenditure that is in the nature of private or capital in nature.
As evident in the case of Gertie and Eddie they jointly own the rental property that
has the current worth of $600,000. It was later decided by Eddie that he would obtain
mortgage for a sum of $300,000 and pay out Gertie. According to the Australian taxation
office an individual is allowed to claim borrowing expenditure related with the purchase of
property namely the loan establishment, title search fees and cost of filing the mortgage
documents2.
There are certain expenditure that are deductible over the period of several years. If an
individual total borrowing goes pas the $100 the amount for deductions would be spread over
the period of five year or over the term of loans whichevers is lower. However if the total
amount of borrowing is lower than $100 then the taxpayer can claim full deductions relating
to such expenditure in the income year in which the expenditure is occurred3. As held in the
1 Barkoczy, Stephen, Foundations Of Taxation Law 2014
2 Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013
3 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation