Conveyancing fees are an unavoidable cost in property transactions, covering the legal and administrative work required to transfer ownership. However, when it comes to taxation, their treatment under Australian law depends on whether the property is used for private or income-producing purposes.
This article examines the tax deductibility of conveyancing fees in Australia, clarifying when such expenses may be claimed, how they interact with capital gains tax (CGT), and what legal principles determine their classification under the Income Tax Assessment Act 1997 (Cth).
What Are Conveyancing Fees?
Conveyancing fees are the legal costs incurred to transfer property ownership from a seller to a buyer. In Australia, these fees cover the professional services of a licensed conveyancer or solicitor who ensures the transaction is legally valid, compliant with state legislation, and properly registered with the relevant land titles office.
In practical terms, conveyancing fees usually include:
- Reviewing and preparing the contract for sale and purchase
- Conducting title searches to confirm ownership and identify encumbrances
- Checking zoning, easements, and planning restrictions
- Coordinating settlement between buyer, seller, and lender
- Lodging transfer and mortgage documents with the Land Registry
From a taxation perspective, conveyancing fees are classified as capital acquisition costs — they relate to obtaining ownership of an asset rather than generating income. Therefore, they are not immediately tax deductible but may be included in the cost base for future CGT calculations.
If you are uncertain about who pays conveyancing fees in your property transaction, it’s best to consult an experienced property lawyer before settlement to clarify each party’s financial responsibilities.
Are Conveyancing Fees Tax Deductible?
No, conveyancing fees are generally not tax deductible in Australia. The Australian Taxation Office (ATO) classifies these expenses as capital costs, meaning they relate to the acquisition or disposal of a property rather than its ongoing income generation. Because of this, they cannot be claimed as an immediate deduction in your annual tax return.
However, conveyancing fees are not entirely without tax benefit. For investment properties, these costs can be added to the property’s cost base under Subdivision 110-25 of the Income Tax Assessment Act 1997 (Cth). This means that while they can’t be claimed as a yearly deduction, they can reduce the capital gain — and therefore the capital gains tax (CGT) — payable when the property is sold.
When Are Conveyancing Fees Deductible or Claimable?
Conveyancing fees are only deductible or claimable in limited circumstances under Australian tax law. They are generally considered capital expenses, meaning they cannot be deducted in the year they are paid. However, they may still provide a tax benefit depending on how the property is used.
Conveyancing fees can be claimed or offset in the following situations:
- Investment properties: If the property is used to produce rental income, conveyancing fees can be added to the cost base for capital gains tax (CGT) purposes. This means that when the property is sold, these costs help reduce the taxable capital gain.
- Property development or trading businesses: When a business buys and sells property as part of its income-generating activities, conveyancing costs are deductible as business expenses under section 8-1 of the Income Tax Assessment Act 1997 (Cth), since they are directly linked to producing assessable income.
- Refinancing or ownership restructuring: If conveyancing services are part of a transaction aimed at generating or protecting assessable income — for example, transferring property into a business entity — they may be deductible as legitimate income-related expenses.
In all other cases — such as the purchase of a primary residence — conveyancing fees are private and non-deductible, though they can still be recorded as part of the cost base to reduce CGT if the property is later sold or converted into an investment property.
How Conveyancing Fees Affect Capital Gains Tax?
Conveyancing fees affect capital gains tax (CGT) by increasing the cost base of your property, which in turn can reduce the taxable capital gain when the property is sold. Under Subdivision 110-25 of the Income Tax Assessment Act 1997 (Cth), any expenses directly related to acquiring, holding, or disposing of a capital asset can form part of its cost base — and conveyancing fees fall squarely within this category.
In simple terms, when you sell a property, your capital gain is calculated as the sale price minus the cost base. The cost base includes:
- The original purchase price
- Stamp duty and legal (conveyancing) fees
- Agent commissions and marketing costs at sale
- Certain holding and improvement costs
By adding conveyancing fees to this cost base, the net capital gain is reduced, which means you pay less CGT.
For example:
If you bought an investment property for $700,000 and paid $2,000 in conveyancing fees, then later sold it for $900,000, your cost base becomes $702,000. The taxable capital gain is therefore $198,000 instead of $200,000, lowering your CGT liability.
In short, while conveyancing fees aren’t tax deductible upfront, they provide a long-term tax advantage by reducing the CGT payable when you eventually dispose of the property.
Are Legal Fees for Property Purchase Tax Deductible?
No, legal fees for purchasing a property are not tax deductible in Australia when the property is used as a private residence. The Australian Taxation Office (ATO) treats these costs as capital expenses, which means they relate to acquiring an asset rather than earning assessable income. Because of this, they cannot be claimed as a deduction in the year they are incurred.
However, legal fees can still provide a tax benefit in the long term if the property is an investment or income-producing asset. In those cases, legal fees — such as conveyancing charges, contract review costs, and title transfer fees — can be added to the cost base for capital gains tax (CGT) purposes. This reduces the taxable gain when the property is sold.
Why Conveyancing Fees Are Not Deductible for Home Buyers?
Conveyancing fees are not tax deductible for home buyers because they are considered capital expenses, not income-producing costs. Under Australian tax law, only expenses incurred in generating assessable income can be claimed as deductions. Since buying a home for personal use does not produce income, these costs fall outside the scope of allowable deductions.
The Australian Taxation Office (ATO) classifies conveyancing fees — including solicitor charges, title searches, and transfer registration — as part of the cost of acquiring a capital asset. This means they form part of the property’s cost base rather than a deductible expense. While this does not offer an immediate tax deduction, it can reduce capital gains tax (CGT) if the property is later sold and subject to CGT.
In essence, conveyancing fees are not deductible for home buyers because they relate to buying ownership rights, not earning income. The only time they become relevant for tax purposes is when the property is later used to generate income, such as being converted into an investment property or sold for a profit.
Are Disbursements and Mortgage Costs Treated the Same Way?
Yes. Associated costs such as mortgage arrangement fees, title registration charges, and settlement disbursements are generally treated as capital expenses.
For investors, these can be included in the property’s cost base. For owner-occupiers, they are private expenses and non-deductible.
However, certain loan establishment or mortgage discharge fees may be deductible where the loan itself is used to generate income, as recognised in Taxation Ruling TR 93/7.
Practical Tax Planning Tips for Property Owners
While conveyancing costs themselves cannot usually be claimed as a deduction, good record-keeping and legal foresight can help optimise tax outcomes:
- Retain all invoices and settlement statements to substantiate future CGT calculations.
- Seek early advice from a tax adviser or find a property lawyer before signing contracts that involve multiple entities.
- Consider long-term tax strategy — for example, if converting a home into an investment property, ensure the original conveyancing records are preserved for later CGT reporting.
- For property developers, ensure conveyancing is billed through the business entity to qualify for deduction under trading stock provisions.
FAQs: Are Conveyancing Fees Tax Deductible?
Even with clear principles, many property owners remain unsure about how conveyancing interacts with taxation. Below are clarifications to the most common legal and tax questions.
Can I claim conveyancing costs on my tax return?
Only if the costs relate to an income-producing property or form part of an active property business. Private residential purchases do not qualify.
Do conveyancing fees reduce capital gains tax?
Yes. While not deductible, they increase the cost base of the property, thereby reducing the taxable gain when the property is sold.
Are solicitor fees for buying a house deductible?
No. Legal and conveyancing costs for personal property acquisitions are capital and non-deductible.
Are conveyancing fees tax deductible for investment property?
They cannot be claimed immediately but can be included in the cost base, effectively lowering CGT payable upon sale.
Why are conveyancing fees not deductible for home buyers?
Because home ownership is a private capital activity, not an income-producing one. The ATO excludes private or domestic expenses from allowable deductions.
Conclusion
Under Australian tax law, conveyancing fees are not tax deductible unless they are directly related to generating assessable income or incurred in a property business context. For most buyers, they represent a capital cost — forming part of the property’s cost base for future capital gains tax purposes.
Under Australian tax law, conveyancing fees are generally capital costs, not deductible expenses. They can, however, deliver long-term tax advantages by reducing CGT for investment properties. For precise guidance and compliance assurance, always find a property lawyer through LegalFinda before finalising any transaction.
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