One set of criteria for all would only be fairest if that set of criteria did not put in place a specific hurdle for certain types of business.
If instead of saying 'excluding real property', the clause instead said 'excluding plumbing tools' or 'excluding gardening equipment', do you think that would be fair?
As it stands, the 'assets test' specifically excludes a particular type of business - i.e. property investing.
No it's not. You could take the train or the bus, or walk. You could choose to move closer to your place of work, or choose to work somewhere closer to your home. Businesses don't pay employees for the time spent traveling to the office. If they did, people would move hundreds of miles from their place of work and get paid just to drive a car all day. They wouldn't get any work done. Driving to the office is done on personal time.
Real property is addressed by a separate test of $500k. This test would favour property investors as most small businesses lease their premises. The other assets test is a separate option for businesses that don't pass any of the other tests. As it stands the real property test favours property investors so they get a big advantage over most other small businesses.
Taking the train or bus to work is also not deductible. Driving to your investment property is also done on your personal time and yet it is claimable. In fact all motor vehicle travel incurred to earn income is claimable with the exception of driving to and from the workplace. There is a specific exclusion for it as the government have worked out it saves them a lot of money. Another perk for property investors.
Real property is addressed by a separate test of $500k. This test would favour property investors as most small businesses lease their premises. The other assets test is a separate option for businesses that don't pass any of the other tests. As it stands the real property test favours property investors so they get a big advantage over most other small businesses.
Perhaps the rules are overly complicated. Some favour property investors, and some disadvantage property investors. Perhaps they should simplify it by removing the $500K test (which favours property investors), and also removing the 'excluding real property' clause from the assets test (which disadvantages property investors) - i.e. keep the same rules for everyone. If $100K of assets is deemed acceptable for share investors and plumbers and gardeners etc. then it should be acceptable for property investors too.
Quote:
Taking the train or bus to work is also not deductible. Driving to your investment property is also done on your personal time and yet it is claimable. In fact all motor vehicle travel incurred to earn income is claimable with the exception of driving to and from the workplace. There is a specific exclusion for it as the government have worked out it saves them a lot of money. Another perk for property investors.
It's not a perk for property investors. Anyone running an individual business can claim travel expenses incurred in the process of earning income.
The reason why employees can't claim for traveling to work is because they are not earning income while traveling to work.
Taking the train or bus to work is also not deductible. Driving to your investment property is also done on your personal time and yet it is claimable. In fact all motor vehicle travel incurred to earn income is claimable with the exception of driving to and from the workplace. There is a specific exclusion for it as the government have worked out it saves them a lot of money. Another perk for property investors.
Travel between places of work is deductible. If you work at home, and work at several other locations, then you can be deemed an itinerant worker and all travel between each workplace is deductible.
Travel between places of work is deductible. If you work at home, and work at several other locations, then you can be deemed an itinerant worker and all travel between each workplace is deductible.
I am an itinerant worker.
Nice one.
The other way around this is to use the depreciation method for your deduction, you don't need to maintain a log book for this method of deduction.
One set of criteria for all would only be fairest if that set of criteria did not put in place specific hurdles for certain types of business.
If instead of saying 'excluding real property', the clause instead said 'excluding plumbing tools' or 'excluding gardening equipment', do you think that would be fair?
As it stands, the 'assets test' specifically excludes a particular type of business - i.e. property investing.
No it's not. You could take the train or the bus, or walk. You could choose to move closer to your place of work, or choose to work somewhere closer to your home. Businesses don't pay employees for the time spent traveling to the office. If they did, people would move hundreds of miles from their place of work and get paid just to drive a car all day. They wouldn't get any work done. Driving to the office is done on personal time.
You are earning income from your investment property while driving to it.
You are not earning income from your employer while driving to work.
In order for an expense to be deductible, the expense must be incurred in the process of earning income.
If employers paid employees for their time spent driving to work, then there would be a case for making travel expense to the office deductible.
Note that you can't claim travel expenses for time spent looking for property to buy, since the property is not yet producing any income.
You've misquoted the requirement for claiming deductions. There is no "in the process of", that there is no requirement that the expense is incurred during work hours, just that it is incurred to gain or produce your assessable income. Or for businesses, necessarily incurred in carrying on a business for the purpose of producing your assessable income. The legislation is below. I've also attached a couple of links that show where the legislation is tested in court that there is no requirement for the expense to be incurred within work hours, only that it is incurred in order to gain or produce the income. That is why there is a specific exclusion for motor vehicles to and from work, because under the normal principles and legislation it would be allowable as a deduction. Not so for property investors however, another perk for them. Note that there are plenty of deductions that are allowed, outside of work hours, if the expense is incurred to earn the assessable income. Your contention that it is because the expense is incurred outside of work hours is incorrect. Under normal principles it would be allowed, however it has been written into the legislation as an exception (and they had to do this because it satisfies the criteria).
(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
Note: Division 35 prevents losses from non‑commercial business activities that may contribute to a tax loss being offset against other assessable income.
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a capital nature; or
(b) it is a loss or outgoing of a private or domestic nature; or
(c) it is incurred in relation to gaining or producing your *exempt income or your *non‑assessable non‑exempt income; or
(d) a provision of this Act prevents you from deducting it.
For a summary list of provisions about deductions, see section 12‑5.
(3) A loss or outgoing that you can deduct under this section is called a general deduction.
The other way around this is to use the depreciation method for your deduction, you don't need to maintain a log book for this method of deduction.
I keep a log book with all my use of that vehicle, then claim the proportion of business use for all the costs of running the vehicle, including fuel, rego, servicing, tyres, insurance, depreciation, interest on the finance (secured by property!) and any accessories (e.g. new floor mats). Given that use of the vehicle for work constitutes most of it's running, I get a nice tax refund each year based just on the vehicle.
Travel between places of work is deductible. If you work at home, and work at several other locations, then you can be deemed an itinerant worker and all travel between each workplace is deductible.
Perhaps the rules are overly complicated. Some favour property investors, and some disadvantage property investors. Perhaps they should simplify it by removing the $500K test (which favours property investors), and also removing the 'excluding real property' clause from the assets test (which disadvantages property investors) - i.e. keep the same rules for everyone. If $100K of assets is deemed acceptable for share investors and plumbers and gardeners etc. then it should be acceptable for property investors too.
It's not a perk for property investors. Anyone running an individual business can claim travel expenses incurred in the process of earning income.
The reason why employees can't claim for traveling to work is because they are not earning income while traveling to work.
Ah so you think they should change the rules so that all property passes the tests. You are good for a laugh!
Incorrect though on the reason why employees can't claim travel to and from work. There is no requirement that deductions are incurred during work hours, only that the deduction is incurred to gain or produce assessable income. It is specifically excluded because they've run the sums and worked out it saves them a lot of money by not allowing it. We went through this in detail at uni, under normal principles it would be allowed, and there are countless examples of expenses that are incurred outside work hours that are allowed, which is why they've specifically excluded it.
You've misquoted the requirement for claiming deductions...
It wasn't a quote, it was an explanation of the intent behind the rules. You don't get paid for driving to work, hence you can't claim expenses incurred while driving to work. Driving to work is something you choose to do on your own personal time.
Quote:
Not so for property investors however, another perk for them.
There's no perk for property investors. Anyone carrying out an individual business can claim business related travel expenses.
Property investors are not allowed to claim for time spent traveling to their normal place of employment.
But any regular employee can claim work related travel expenses by starting up their own individual business.
The rules are the same for everyone.
piccolo
19 Aug 2014, 03:44 PM
Ah so you think they should change the rules so that all property passes the tests. You are good for a laugh!
I'm fine with the rules as they are. You are the one complaining about them and saying we should remove any rules that benefit property investors while keeping any rules that disadvantage property investors. I'm OK with the rules staying as they are, but if they were to be changed then it would be important to do it fairly so that specific businesses, whether that be gardeners, plumbers or property investors, are not singled out for unfair treatment.
It wasn't a quote, it was an explanation of the intent behind the rules. You don't get paid for driving to work, hence you can't claim expenses incurred while driving to work. Driving to work is something you choose to do on your own personal time.
There's no perk for property investors. Anyone carrying out an individual business can claim business related travel expenses.
Property investors are not allowed to claim for time spent traveling to their normal place of employment.
But any regular employee can claim work related travel expenses by starting up their own individual business.
The rules are the same for everyone.
I'm fine with the rules as they are. You are the one complaining about them and saying we should remove any rules that benefit property investors while keeping any rules that disadvantage property investors. I'm OK with the rules staying as they are, but if they were to be changed then it would be important to do it fairly so that specific businesses, whether that be gardeners, plumbers or property investors, are not singled out for unfair treatment.
It wasn't a quote, it was an explanation of the intent behind the rules. You don't get paid for driving to work, hence you can't claim expenses incurred while driving to work. Driving to work is something you choose to do on your own personal time.
So now you know the intent behind the rules (which you wrong about by the way)? And you say driving to work is something you choose to do on your own personal times? I know hundreds of thousands of workers driving to/from work would disagree with you. They drive to and from work to earn income, not because they choose to. The intent behind the rules has been tested thousands of times in court, and the intent is to allow expenditure necessarily incurred in earning assessable income as a deduction. The intention behind the general law would allow driving to and from work as a deduction, however it has been specifically excluded on the basis of the cost to the budget. There are plenty of deductions that are incurred outside working hours that are allowable (i.e. there is no requirement that deductions are incurred in working hours). However I think you understand all this and are simply arguing for arguments sake.
There's no perk for property investors. Anyone carrying out an individual business can claim business related travel expenses.
This is true, however other businesses are subject to tests before they can claim a loss against other income. Property investors are not subject to these tests. That is, they get the tax perks of being in business, but do not have to satisfy the same criteria that other businesses have to.
The rules are the same for everyone. It depends what you mean by this statement. There is one set of legislation. However that legislation allows more favourable treatment to some forms of investment (namely property).
I'm fine with the rules as they are. You are the one complaining about them and saying we should remove any rules that benefit property investors while keeping any rules that disadvantage property investors. I'm OK with the rules staying as they are, but if they were to be changed then it would be important to do it fairly so that specific businesses, whether that be gardeners, plumbers or property investors, are not singled out for unfair treatment.
Of course you are fine with the rules as they are, because property (your favoured investment) gets preferential tax treatment. All the tax benefits that businesses get, without having to satisfy the same criteria as businesses to be able to claim losses. If the rules were changed, it would make sense to align the rules for property with that of other businesses as property gets the same tax benefits as other businesses. This would not disadvantage property investors at all compared to other businesses. They would simply have to consider the tax implications prior to purchase like any other business investor would, i.e. will I make a loss, and if so can I claim it. The hurdles would be exactly the same so there is no unfair treatment, it is very fair. If anything property would have an advantage over other businesses as around half would automatically qualify by being over $500k.
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