On the 1 January 2014, the house was officially listed for renting using the local estate agent service (may be an advertisement fee exists). A tenant for the property was not obtained immediately; it took 2 months for a tenant to move in to the house, specifically on the 1 March 2014. This report will explain what deductions are available to be claimed in regarding to Dr John 's expenses.
What can Dr John claim?
Some of those expenses can be claimed as deductions.
Interest loan
According to section 8-1 ITAA 1997, expenditure on the interest of the loan is deductible to the extent that the money from the bank is used for the purpose of generating income or is necessarily incurred in carrying on a business for the purpose of producing assessable …show more content…
Following years calculation for borrowing expenses deduction This figure will be claimed for the second and third year of the loan period.
‘Hallstroms Pty Ltd c FC of T (1946) 72 CLR 634’ case may be relevant to Dr John borrowing expenses situation. The company paid those legal expenses because they were literally running a refrigerator manufacture business, which was to produce income. A majority of High Court’s judges agreed that the legal expenses paid by the Hallstroms Pty Ltd were revenue in nature. Dr John situation has similarity with above case, which are those expenses relate business expenditure. Therefore, the borrowing expenses Dr John paid are categorised in the revenue in nature, which means it is deductible (Stephen 2014, p 347)
Repair
Section 25-10 ITAA97 outlines that deductions for expenditure are claimable on repairs to depreciating assets used for the purpose of gaining …show more content…
With this documents or records, he will not be liable for any penalties (Australian Taxation Office 2014)
The case of “Lurcott v Wakely and Wheeler ([1911] 1 KB 905, per Buckley LJ at 923” can be used as a reference to Dr John’s situation. The case was about a concern of a lease of an old house. The front wall of the leased house had to be demolished. A question arose as to whether this constituted as a repair. The English Court of Appeal decided that it was a repair (Stephen 2014, p 399)
It is important to note that substantial improvements to a particular item will not be classified as a repair. In this case, substantial improvement is interpreted as an improvement made to any premises at least three years after the premises were used; and also the improvement made over 25 per cent of the value of the premises over two years. If a substantial improvement has been made to any item or premises, the expenses on this improvement will fall under the capital
What can Dr John claim?
Some of those expenses can be claimed as deductions.
Interest loan
According to section 8-1 ITAA 1997, expenditure on the interest of the loan is deductible to the extent that the money from the bank is used for the purpose of generating income or is necessarily incurred in carrying on a business for the purpose of producing assessable …show more content…
Following years calculation for borrowing expenses deduction This figure will be claimed for the second and third year of the loan period.
‘Hallstroms Pty Ltd c FC of T (1946) 72 CLR 634’ case may be relevant to Dr John borrowing expenses situation. The company paid those legal expenses because they were literally running a refrigerator manufacture business, which was to produce income. A majority of High Court’s judges agreed that the legal expenses paid by the Hallstroms Pty Ltd were revenue in nature. Dr John situation has similarity with above case, which are those expenses relate business expenditure. Therefore, the borrowing expenses Dr John paid are categorised in the revenue in nature, which means it is deductible (Stephen 2014, p 347)
Repair
Section 25-10 ITAA97 outlines that deductions for expenditure are claimable on repairs to depreciating assets used for the purpose of gaining …show more content…
With this documents or records, he will not be liable for any penalties (Australian Taxation Office 2014)
The case of “Lurcott v Wakely and Wheeler ([1911] 1 KB 905, per Buckley LJ at 923” can be used as a reference to Dr John’s situation. The case was about a concern of a lease of an old house. The front wall of the leased house had to be demolished. A question arose as to whether this constituted as a repair. The English Court of Appeal decided that it was a repair (Stephen 2014, p 399)
It is important to note that substantial improvements to a particular item will not be classified as a repair. In this case, substantial improvement is interpreted as an improvement made to any premises at least three years after the premises were used; and also the improvement made over 25 per cent of the value of the premises over two years. If a substantial improvement has been made to any item or premises, the expenses on this improvement will fall under the capital