"HELP!', Building an IP"



From: Geoff Perks

Any advice appreciated please:
Paying off own home & am going to build an IP in Melbourne which I intend to move into in say 5 years. Would love advice on:
(i) Do I have to wait until a tenant to claim interest and other expenses for tax deduction? Or can I claim for interest etc straight after buying land and during building process?
(ii) When I eventually move in to IP, besides selling costs involved in selling existing home, and not being able to claim deductions on IP anymore, are there any hidden costs I may not be aware of?

Anyone who has been in similar situation and can offer advice would be much appreciated.
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Reply: 1
From: Geoff Perks

This is weird as I am replying to myself! Just read on p145 Jan Somers Building Wealth "...if you are building an IP for rental purposes the interest repayments are deductible during construction time". Hope this is up to date. Anybody experienced this first hand?
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Reply: 1.1
From: Ian Parham

Hello Geoff & All
(Pleased to meet you Geoff, small world of IPs...I'm an Ops Controller at the Cavern in Sydney).
Have been in your very situation, building an IP, 1997.
Initially I thought I could claim interest payments on loan for land and then interest on loan for building. My accountant said, "Can't claim land component because interest payments are not claimable until the house is complete and available to be tenanted"...but I was still able to claim interest and other costs during the construction process, but not prior??
I have since seen a post here (now in archives) indicating that there had been a separate tax ruling whereby someone challenged on the basis that the intent of the property was purely as an investment and therefore the interest payments on land should be allowed. (I'll be speaking to my accountant again shortly to challenge her on this).
If this has been accepted practice, then it is a bonus...albeit retrospectively for me.
Otherwise all my legitimate costs associated with building at the time were claimed and accepted.
As for your current dwelling, did you definitely intend selling it, or is it beneficial for you to consider renting it out too?
Have you an accountant (IP savvy)?
Earlier posts with some contacts have been submitted here, might pay to have a retrospective read.
Feel free to e-mail me if you wish.
Cheers Ian
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Reply: 1.1.1
From: Ian Parham

Sorry, just saw your other post re: IP accountant - Melbourne.
Cheers Ian
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