jiminoz Posted February 18, 2015 Share Posted February 18, 2015 Hi all Been searching the ATO website on this but I cant find anything as I don't think there is a freehold/leasehold system on apartments in Australia. I have a leasehold flat in the UK that is ticking down to 80 years remaining on the lease, and am currently negotiating with the freeholder to extend this for another 50 years or so. The cost is likely to be around 9-10k GBP. Until now the property has had a positive net rental income which is declared and paid for on my Oz tax return each year. My query is, would the cost of the lease renewal be considered a deductible expense by the ATO? Cheers Jim Link to comment Share on other sites More sharing options...
buzzy--bee Posted February 18, 2015 Share Posted February 18, 2015 You should be doing a UK tax return and then reporting the outcome of this on your Australian tax return, unless your property brings in revenue (not profit) of less than £10,000 per year. I believe that in both cases the cost of your lease extension would be considered a capital expense and therefore not relevant to your income tax return, only relevant for CGT when you sell the property. BB Link to comment Share on other sites More sharing options...
jiminoz Posted February 18, 2015 Author Share Posted February 18, 2015 Thanks Buzzy Bee. I should have mentioned that I do fill in a UK tax return each year as well but the income is under the threshold for tax as a UK citizen, so no tax to pay there. Unfortunately not the case when the income is declared on my Aus tax return. I was hoping for a nice fat deduction there but will just have to wait until we sell it I suppose! Cheers Jim Link to comment Share on other sites More sharing options...
grahamffc Posted February 18, 2015 Share Posted February 18, 2015 Don't take my word for this but I would expect this would be treated the as the capital value of the apartment, or depreciated over the life of the lease, if that's 50 years it's not going to amount to very much. But it's certainly not accurate to claim the whole cost only relates to one year. If it's your only UK property and you lived in the UK you would not pay any tax on any profits from sale and this would just be classed as adding to the purchase cost. I've no idea of the implications if/when you come to sell for you ATO return. Link to comment Share on other sites More sharing options...
jiminoz Posted February 19, 2015 Author Share Posted February 19, 2015 Thanks Graham - it is our only UK property and primary residence. As we haven't bought anywhere out here in Australia I understand the rules are that you are allowed to rent it out for up to 6 years before becoming liable for capital gains tax to the ATO. I'm hoping we can avoid it in the UK as well, having been out of the country for over 5 years, but will be seeking professional advice on this at some point before we come to sell. Cheers Jim Link to comment Share on other sites More sharing options...
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