Taxation query scenario

Hi all

Just to clarify generally speaking, interest is deductible if the borrowed money is being used for income-producing purposes.  If the borrowed money is being used for private purposes, then interest on this part of the loan is non-deductible.

Most of you probably already knew the above but l guess the question that you really want answered is interest incurred before a property produces rent deductible?
The short answer is 'Yes'
Interest can be deductible during the period before a rental property is actually rented to tenants and before it is available for rent.

Common examples of situations when interest can be deductible include the period when:
1. a rental property is being built
2. work is done to a rental property after purchase to prepare the property for rental and
3. a rental property is taken off the market for repairs/improvements

But the onus is on the landlord to establish that the intention was always to use the property for income producing purposes.

In your case until you actually use the money to purchase a property you will have a hard time in convincing the ATO that your interest is deductible prior to your property purchase.

Regards

Maurice