Claim interest for IP under construction using e-tax

[rotsevni]

Hi there,

I am looking to claim the interest costs while my IP was under construction.

Has anyone claimed this deduction using e-tax? When going through e-tax, the Rent section asks the question 'Did you earn rental income or was your property available for rent? This seems to be the only section where you can enter your interest deductions and other rental property expenses into e-tax.

In my case my property was available for rent in August 2012 as that is when construction was completed. E-tax asks the question 'Date property first available for rent.' If I enter August 2012 which enters into the next financial year, are my deductions valid for the 2011-12 financial year?

If anyone has done this using e-tax, please let me know how you went about it.

Thanks.

 

[vaughan]

The property was not available for rent while under construction, so there is no deduction for that period. So you have no deductions for 2011-12 financial year.

This is whether using eTax or not.

 

[Terry_w]

The property was not available for rent while under construction, so there is no deduction for that period. So you have no deductions for 2011-12 financial year.

This is whether using eTax or not.

Not the case. See Steele's case

 

[westminster]

Sorry I have no idea where it goes in etax but yes I did claim my interest. In my case it was demolish house Aug 2011 then construction until April 2012 then rent out.

 

[menty]

Apparently there is a private ruling for Interest on construction if the purpose is to rent it out

 

[Rolf Latham]

The property was not available for rent while under construction, so there is no deduction for that period. So you have no deductions for 2011-12 financial year.

This is whether using eTax or not.

we run into this one, at least once a fortnight, Terry has pointed to the ruling that applies in most instances.

Your belief is shares by the majority of tax agents too, so dont feel left out.

ta
rolf

 

[Terry_w]

Apparently there is a private ruling for Interest on construction if the purpose is to rent it out

There would be a few private rulings, but these don't apply to other people, only to the person who submitted the ruling. What there is a is caselaw, the Steele case. Following this the ATO putout a tax ruling

TR 2000/17
Income tax: deductions for interest following the Steele decision
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR200017/NAT/ATO/fpF3'&PiT=20020717000001

 

[GaryT]

Interest is claimable on building intended for rent

This issue was resolved many years ago in Steele‟s case where the intended use was what counted. It applies to all expenses including rates, land taxes, etc.

The ATO even accepts this in their Rental Properties 2011/12 publication NAT 1729. The booklet, on page 7 says that "You can claim expenditure such as interest on loans, local council, water and sewage rates, land taxes and emergency services levy on land on which you have purchased to build a rental property or incurred during renovations to a property you intend to rent out."

This leaves the door wide open to claim interest right up until the time you
change your mind, the only problem being proving that you originally intended to use it for rental yet never did.

However it is not recommended that you do this with a home that becomes your main residence as the effect it has on your main resident exemption is probably not worth the initial tax deduction.

The ATO again ignores its own rulings and publications with the questions it asks in e-tax. - Best to pay a few dollars and get an accountant to lodge for you.

 

[vaughan]

Not the case. See Steele's case

Indeed, you've posted that many times now I should have remembered.

Thanks.

 

[coastymike]

Agreed Gary. With a new tax commissioner coming on board expect an even bigger focus on audit.

ETax is a favourite of theirs. Big refunds through etax means higher potential for audit. Tax agents with a high number of investment property profile clients means lower risk of audit. It is a categorisation and something learnt during my time spent doing tax audits as a prudential auditor.

 

[rotsevni]

Thanks for all the replies everyone It seems that I may have to use a tax agent for this.

Can anyone recommend a tax agent based in Melbourne specialising in property investment?

 

[wobbycarly]

James at House of Wealth gets a lot of mentions.

 

[poppy]

I have claimed expenses and interest for rental properties under construction several times using e-tax. e-tax isn't really set up to deal with this scenario, as some mandatory fields were not applicable such as date available for rental. However, I still claimed and put a note in (I think) the address field saying "under construction". The ATO never questioned me about this. Funny how they hassle me if I claim a few hundred bucks in work related expenses but don't question tens of thousands in other deductions.