All Topics / Legal & Accounting / Bank Break cost – Expense or capitalised on Investment Property??

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  • Profile photo of jsawtelljsawtell
    Participant
    @jsawtell
    Join Date: 2007
    Post Count: 57
    March 28, 2009 - 8:53 am

    Hi,

    Apologies if this has been posted previously.  Did a quick search.

    Question,
    I have an investment property which we are breaking the Fixed interest.  Are the Break cost tax deductable as an expense or capitalised until sale?

    Thanks
    Jason

    Profile photo of eddieceddiec
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    @eddiec
    Join Date: 2004
    Post Count: 113
    March 30, 2009 - 8:15 am
    jsawtell wrote:
    Hi,

    Apologies if this has been posted previously.  Did a quick search.

    Question,
    I have an investment property which we are breaking the Fixed interest.  Are the Break cost tax deductable as an expense or capitalised until sale?

    Thanks
    Jason

    Hi Jason

    I believe the "breaking cost" is usually characterised as "penalty interest".  It is very rare for interest to be treated as a capital outgoing.  Provided that the property for which the loan was drawn down is available for rent, my view is that the penalty interest will be fully tax deductible.

    Eddie
    [email protected]

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