4 Minute Read.
4 Minute Read.
In recent years the Australian Taxation Office (ATO) have decided to pay more attention on the humble property investor, therefore it is important that we answer an important question that has been on the mind of many individuals – Are you able to claim buyer’s agent fees as a tax deduction?
Wise Real Estate Advice Senior buyer’s advocate, Mark Ribarsky, addresses that “property buyers often become confused when it comes down to investment properties, and the involvement a buyer’s advocate has when choosing an appropriate property manager”.
The following question can be broken down into yes and no.
If a buyer’s agent has decided to help you purchase your dream house that you wish to live in, then the fee is not tax deductible. The entire process of the agent purchasing the property and negotiating a contract will not be included.
On the other hand, if a buyer’s advocate has helped you purchase an investment property, then their fees can be created as a part of a cost base for capital gains reasons.
It might not reduce your tax within the next 12 months, however when you decide to sell your investment property you will pay a reduced amount on capital gains tax.
According the ATO, ‘the cost base of a capital gains tax asset is generally the cost of the asset when you bought it plus other costs that are associated with holding, obtaining and disposing of an asset’.
For example, solicitor expenses, borrowing fees, auction fees, property management fees, buyer’s agent fees and stamp duty.
The simple answer presented by the ATO is no. The main role of a buyer’s advocate is to undertake the entire process of purchasing a property, however it is quite common for them to offer ongoing property management services.
If they do not offer the service, it is still common for the agent to select a property manager free of charge, in order to maintain a competitive advantage over its competitors. Regardless if the property is a place where you want to live or an investment property, the agent will charge the same fee regardless if the buyer does not require the service of a property manager.
However, if a buyer’s advocate decides to charge a particular fee such as the time spent on acquiring a property manager or to include the total fee on the invoice, then you could potentially argue a case on the amount tax deductible.
In regard to the tax payable for buying/selling a house or an investment property, the ATO have provided the following topics:
For more advice on taxation purposes, contact the Australian Taxation Office by: