Hi All, I am a long time lurker & a very new member (fresh) but would like some advice.
We have a ppr & a couple of IPs which are essentially debt free but with loan a/c still open & accessible. We are considering buying & developing a block of land (da approved for a house).
If we intend to sell the house after it is built, are the holding costs tax deductible (interest, rates etc) even though there will be no income generated until the sale of the house? Does the construction need to be done in any timeframe (DA expires in 2011) – if we wait until say 2010 to start building would this make any difference to the deductibility/costs?
What if we changed our minds due to change of personal circumstances and had to sell our ppr and move into the newly built property – would the costs claimed need to be refunded to the ATO?
Selling the ppr may expose some cgt exposure (post 1989 asset, rebuilt in 2001 as ppr).
Should we shift the current assets into a trust to assist in being able to justify any of the buy/hold/develop/sell or buy/hold/develop/occupy decision?
Ta
Hi I Pee
I beleive there was a case a few years ago called Steele v Comm Taxation about the claiming of interest on vacant land. The end result was that interest and other expenses were claimable if the property was purchased with the intention of being an investment property. Do a search on the ATO legal site for "steele" and you should find a Tax Ruling on this. If you cannot find it, I have a copy somewhere. I don't think there is a time frame if you can establish that the intention was for investment (and this should include building with the intention to sell). Show your accountant the ruling.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry – the link is http://law.ato.gov.au/atolaw/view.htm?locid='JUD/99ATC4242'&PiT=99991231235958
Now, as the property is vacant land, as I understand it, the costs of tree removal would be capitalised (and be offset on capital gains), the holding charges would be expensed (against other private income) etc.
In order to 'prove my case' ie intent, should it ever be necessary, I would need to have completed my due diligence prior to purchase including modelling of purchase, development, holding costs and sales income/market appraisal or valuation (all dated Jan 2008, of course). Should I change strategy later on, ie reappraise the development & decide to hold (and sell the ppr) this should be documented as well (full investment analysis, again).
Hello
I believe the costs would only be deductible if you were planning on renting the property. I think that similar questions have previously been posted.
Will link is also helpful:
http://law.ato.gov.au/atolaw/view.htm?locid='AID/AID2001307'&PiT=99991231235958
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