Hi, hope I could get some insight on whether or not I could claim interest on investment property contruction loan from the 1st interest payment or the tax deductioon only applies once the property is build/ tenanted?
thanks for your help.
Yes you will be able to claim interest from get go if property is for investment purpose.
Always best to check with your accountant as I am not aware of your full situation.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Yeah I can't see why you couldn't since the intended end use is an IP.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Depends on the circumstances, but generally you would if it is your intention to rent the property out once it is complete, the precedent case is "Steele"
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
Thank you so much for your replies. Really helpful.
@terryw, i just read the tax case you referred to, it sounds like the interest on creating capital is not tax deductible, and construction could ve argue as capital creation even with intention to rent out the property so based on this case, it wont be tax deductible during construction. Am i reading the case correctly?
Ynchai wrote:Thank you so much for your replies. Really helpful.@terryw, i just read the tax case you referred to, it sounds like the interest on creating capital is not tax deductible, and construction could ve argue as capital creation even with intention to rent out the property so based on this case, it wont be tax deductible during construction. Am i reading the case correctly?
Outgoings of interest are a recurrent expense. The fact that borrowed funds may be used to purchase a capital asset does not mean the interest outgoings are therefore on capital account (see Steele 99 ATC 4242 at 4249; (1999) 41 ATR 139 at 148).
See TR 2004/4
Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities
http://law.ato.gov.au/atolaw/view.htm?Docid=TXR/TR20044/NAT/ATO/00001Terryw | 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
Ynchai wrote:Thank you so much for your replies. Really helpful.@terryw, i just read the tax case you referred to, it sounds like the interest on creating capital is not tax deductible, and construction could ve argue as capital creation even with intention to rent out the property so based on this case, it wont be tax deductible during construction. Am i reading the case correctly?
You are probably only reading the AAT and Federal Court decisions.
The appeal to the High Court was successful.
I must say that the ATO website seems misleading in that it fails to emphasis the requirements of ongoing efforts to progress your project AT ALL TIMES.
Mere intention is not enough. Yet most forum posts seem to proceed on this basis.
Keep evidence of your ongoing activity. You don’t get an interest deduction for merely holding a property for future development.
So if I commence development, I can claim interest on the purchase of the land, plus the interest on borrowings for the progress payments to the builder?
Can I get a PAYG variation for the expected interest (whcih will help with my cashflow)?
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