My read would be that capital items (renovations, etc) will be added to the cost base. Operating costs including repairs, rates and interest will be 'lost' in that they are neither deductible nor capitalised for a holiday home (private use but no PPOR exemption).
Alex
Biggles is correct; interest, rates and other such costs may be added to the cost base if the asset was not used to generate assessable income (and therefore those expenses were not claimed on an ongoing basis).
Hold on. I don't get that. You're saying interest on an asset purchased for private use (but which doesn't have the PPOR exemption) gets added onto the cost base for CG calculations?
That's correct. If you purchase a holiday house, for your own use, you will pay CGT when you sell. However, the holding costs (rates, interest etc) are added to the cost base, reducing your capital gains.
Thanks James, I had a quick look for an ATO reference but couldn't find one. I was sure that was the case, but I know there are some very knowledgeable and experienced people on this forum so didn't want to push what I thought was the case unless I was 100% sure, and I was only 99% sure.
Wow! The holiday house thing is surprising. I would never had guessed you could add the interest onto the cost base. Mind you, I don't have a holiday house, so is irrelevant in my case.