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Trading diamonds is 1. buying 2. holding on to them while a good price is obtained. This could be days, months, years, decades. Meet business expenses during this period ie. pay interest. 3. sell. Same goes for antiques. Suppose you don't have a rental income (could not find a tenant, tenant...

1. It has to be available for rent, but you certainly are allowed to have it vacant if you cannot find suitable tenants. What ATO emphases is that you cannot use it for private purposes. It has be available for its business purpose of renting out and making money. If your tenants don't pay the...

Thanks Terry - I thought about that. I end up questioning whether I could operate the IP through a business (sole owner as myself?) and my salary would be equal to the rental income, so the business capitalise interest to pay for expenses. I have no knowledge here.

I disagree. ATO cannot say that you must find a tenant and somehow extract rent from the tenants. You may not be able to find a suitable tenants. Or your tenants may not be able to pay rent. Whatever the case, if you get a rental income of $15K, you end up paying tax on it. If you get $30K...

Sure the property has to be available to rent; but does not mean you have to rent it out if you can't find the suitable tenants. Suitable tenants mean those who can pay the rent and look after the property as well. If you have an expensive property, it will very well be the case that you can't...

Dan, I don't think this is possible due to a few reasons. Suppose I run a business. Does ATO say I am not allowed to borrow money to pay for business expenses (interest tax deductible) while taking out profits, paying tax on it and using the after-tax income on private purposes like...

I think you are a little confused here. ATO cannot say an IP has to produce an on going income. As far as I have understood, you can buy an IP, not rent it and sell it after x years if you believe that will still give you a profit. IP does not need to be a house. You can buy diamonds or...

You are right except for "...and use the income to pay down non-deductible debt.". What decreases the tax payable is the fact that you are allowed to take out rental income and spend on a private purpose. The purpose the rental income is used does not increase or decrease the tax payable as long...

We don't refinance up to 450,000 and withdraw the extra 50K. If we did that, interest on that 50K would not be deductible. However, what happens here is different thing. We use rental income for a private purpose while capitalising the interest. ATO does not out rightly ban this. Then the...

Dan, IP Expenses are tax deductible. IP Income is taxable. Suppose my taxable salary is $80,000. IP Expenses: $20,000 IP Income: $15,000 So, I have to pay tax on the amount of: $80,000 + $15,000 - $20,000 What this shows is that the rental income of $15,000 is taxable and is taxed. If I...

Hi Aaron, I see your point; but on the same token, IP expenses are not deducted until the tax return is done as well; so the ATO gets a bigger benefit there when IP's are negatively geared. In any event, I don't see why ATO thinks using rental income to pay for private loans is "tax...

I really don't understand why the ATO thinks it is unfair to capitalise interest on IP loans while using the income produced by the IP for private purposes. The income produced by the IP is counted towards the taxable income, hence is taxed, so why does ATO think it is unfair to use those...