Tax Tip 7: keep All Receipts forever

Imagine 30 years of rates, fees, repairs, bank statements etc etc it was a over 200k of expenses.
A few were missing, though the amount was on the next invoice.
As posted before I keep them in plastic pouches with a few folders per property in chronological order. All recorded in an XL spreadsheet.
As for faded invoices I generally print statements and mark the reason for the expenses to make it easier for the accountant.
Nah I'm not a librarian I like to work in controlled chaos, or just chaos.
Some more recent IPs where it was all by email I even forget about.

Nah I'm not a librarian I like to work in controlled chaos, or just chaos.
Some more recent IPs where it was all by email I even forget about.

 

1990s bankruptcy assets



2022 bankruptcy assets

 

So many... the boomers liked building things more than the zoomers it seems.


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When I can't get a electronic one, I've usually scanned the paper receipt with the Dropbox app before I've even left the store.

 

I hope I am understanding correctly that all receipts related to expenses of maintaining the PPOR (e.g. repairs, rates, etc) should be kept in case it becomes IP in the future.

What about home improvement items? (e.g. renovations to add a bathroom, additional lighting, A/C, landscaping, random new tap from bunnings, etc). Do these records need to be kept as well?

Also, does anyone have any recommended tools or templates for this purpose?

Thanks!

 

Keep them all and let your accountant sort it out.

 

For CGT purposes it would not be necessary to keep these receipts if the property was 100% exempt before it converted to an IP - as the CB would be reset to MV as per s118-192.

But the other way around i.e. IP --> Main Residence - then yes you would definitely want to keep them.

I recommend people use excel. Very simple

 

There can be a chance that a main residence could be 100% exempt, but isn't because another property was chosen as the main residence, a spouse might claim one even, so I think it might be worth keeping receipts just in case.
I guess you will know whether this could be the case or not though

 

Thanks @Trainee @Simon Barker @Terry_w for your comments.

So hypothetically, if we bought P1 for 500k today as a PPOR and in 2032 decide we want to move into P2 and rent P1 out, then the below would apply:

• P1 is 100% CGT exempt currently
• Cost base is reset to the market value of when P1 is no longer a PPOR in 2032 (say 700k)
• If P1 was sold in 2042 for 1m, CGT will be calculated as 300k (1m-700k), and because held for more than 12 months, 50% CGT discount applies.

So if it is only as per the above scenario, it doesn't really matter if no receipts were kept between now and 2032. However, like Terry said if possible still good to keep in case of other circumstances leading to losing P1 as PPOR, correct?

 

Might have asked this before, but in the PPOR then IP then sold scenario, can third element costs while the property is PPOR be applied to reduce the capital gains while it is IP?

 

No. s118.192 draws a line with the costbas reset at the date the property first produces income. Only a pro-rata CGT issue can allow 3rd element costs.
In the example given all ownership costs are deductible when its a IP. However if the use went from main residence to investment and back to main residence yes they could be a factor.

 

Other factors will affect the calculation eg reduced costbase for QS deductions, selling costs etc

 

PPOR is a state tax phrase for commonwealth tax it is called the main residence.
If the main residence is not counted as the main residence and goes to investment the 3rd element costs during the period when it was lived in could be counted.

Example
Homer had Property A which qualified as the main residence and also property B which qualified as the main residence. They lived in both. the sold A and claimed the exemption on it. When they sell B they could claim the 3rd element cost base expenses while living there as it was never income producing.

 

I just encountered a loan client who mentioned that she owns a property that her parents paid for and treats it as their property. I suggested that it could be that both this property and her property could both be exempt from CGT as the main residence, and it could even be transferred to the parents without triggering stamp duty or CGT.

We just need proof that the parents paid for it - bank statements, dating from 12 years ago.
Potential capital gain is $400k at the moment so a lot of hinging on whether these bank statements can be found.

 

I have had a few clients encounter this. In one a penthouse city apartment worth a LOT. For some inane reason her former tax adviser suggested a company own it. To reverse this we introduced her to a good duties lawyer and had to produce proof that she personally paid for it and produced copies of presented cheques drawn on her own account. OSR queried why Westpac lent to the company and the credit manager basically said they didnt care who held the legal title as long as Mrs XXXX signed for the loan. OSR agreed the company was an apparent purchaser and allowed transfer of title to her name. Transfer duty was minor I recall. ($200?)

The $40+ million increased value is now all tax free. Not that she will ever sell it. Her kids will appreciate the lack of a tax bill when she dies.

There are two approaches to this issue - Retain info and even get a ruling at the time of acquisition. Or later but its harder. Keeping copies of relevant docs will certainly assist.

Its actually fairly simple legal process but starts with getting legal advice as early as possible. Wise when parents fund a choice. It can be used for asset protection sometimes and can legit evade CGT and land tax issues.

 

Its a good way to get some asset protection as well as the main residence CGT exemption

 

What happens if you inherit assets and you've been told by the executor what the cost base is but don't have those records yourself? Is keeping the advice from the executor sufficient?

 

no

 

I would encourage you to obtain a copy of the deceased records so you hold them. If its a market value acquisition then the market valuation may suffice.

 

Does the ATO listen when you tell them time expired when the client is under audit?