Private ruling: Stamp duty expenses
Published: August 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Can you claim a deduction for a portion of the stamp duty you incurred on lease documents in relation to your Australian Capital Territory (ACT) property? | A1: Yes.

Relevant facts and circumstances: You purchased a leasehold property in the 2011-12 financial year in the ACT. You paid stamp duty to the ACT government. You rented your property out for part of the year. The property was also used as your principal place of residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 20-25. | Income Tax Assessment Act 1997 Subsection 25-20(2).

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Generally, costs associated with acquiring a property are not deductible. For example, conveyancing costs and stamp duty on the transfer of the property are considered capital in nature and therefore not deductible. However, section 25-20 of the ITAA 1997 states the costs of preparing and registering a lease and the cost of stamp duty on a lease are deductible to the extent to which the property has been used, or will be used, for the purpose of producing assessable income. Although the term lease is not defined in the taxation legislation, the general law requirement is that a lease must be granted for a definite period. A crown lease with a term of 99 years is a lease for the purposes of section 25-20 of the ITAA 1997. In your case, your ACT property was acquired under a Crown lease and, as stated above, is considered a lease for the purposes of section 25-20 of the ITAA 1997. Subsection 25-20(2) of the ITAA 1997 states that if you have used, or will use, the leased property only partly for the purpose of producing assessable income, you can only deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose. You rented out your property for part of the year. The property was also used as your principal place of residence. Therefore, as the leased property was only partly used for the purpose of producing assessable income you will need to apportion any deduction claimed for the stamp duty incurred, in relation to the lease, to reflect that use. Any apportionment would need to be reasonable and reflect the period that you reasonably expect to hold the property, as well as any future intention to again use the property for the purpose of producing assessable income. Providing your expectations and intentions are reasonable at the time you claim the deduction, there will be no consequences if your expectations and intentions subsequently change.

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