Help is this first home or investment?

[firsttime]

Hi all

I am preparing to buy my first property but its going to be a block of land in a different state to which I live. My plan is to get the land which will be in WA now to prevent price rises in the future, pay it off in 5 to 6 years and then move to WA and start building my first house on that land once its paid off in the first few years.

My question is since its my first time buying a property but seeing I am only buying a lock of land and will be living in a different state will it be viewed as my first property thus not having to pay stamp duty, transfer & registration fees or will it be viewed as an investment property thus having to pay all that?

Also if its viewed as an investment property, will the mortgage interest on the land be tax deductible but its not earning me any income as its a land not a house on a land that I am renting out?

If this is not a good investment choice what other strategy would you recommend? I guess what I am doing is planning for my future more so than investment at this point as I am planning to move over in a few years time and want to get into the market while I can financially afford to.

 

[craigb]

thats a great way to put your foot print on some future capital gains, although, it does not return much rent, so if you said it was an investment, the costs would be reduced against your tax, but be prepaird to pay capital gains tax on this when it sell.
on the other hand getting all of the duty deductions might be better than claiming the capitol losses, but at the end of the day it really is your call.

 

[firsttime]

Hi Craigb

Thanks for your advice. From what you are saying does that mean I can do it either way legally? So I can either claim it as an investment and still be able to claim mortage interest as a tax deduction even though it doesn't generate any income at all being a block of land or I can claim it as first home and not get charged stamp duty even though I will not be building on the land for a number of years?

I am most likely going to keep it for building my first house after I have it paid off in a few years so not to worried about CGT.

I had a fiddle with the NAB calculator http://nab-calculator.realestate.com.au/ and stamp duty is probably less than $4000 all up but the mortgage interest would be about $20k. Do you reckon claiming it as investment and have the interest deducted from my personal tax would yield me more benefit?

Thanks for helping, I new to this so learning my way as I go along.

 

[tobe]

Do some research, buying vacant land from a developer and holding for increased capital gains without an income (rent) is a really tough way to make money in my opinion. Either buy and build now and either rent out or live in, or buy a flat, again either rent it out from the start, or live in for a time and get the FHOG and then rent out.
Your interest/holding costs are offset by the rent and ATO, you have a toehold into the market with which to afford the higher price of land later when you are ready to build, and if you change your mind, you have an income producing investment in the meantime which you can use to leverage into another investment, or a home of your own anywhere you like.

If you change your mind about the land, and have to sell, you may have some capital gains, but they cannot be offset by either the 50% concession for income producing investments, or the PPOR concession, as you havent lived there......

 

[saskatoon]

Do a search on this site, and on the ATO website. I doubt whether your mortgage payments would be deductible since the block of land is not income-producing. Hoping I'm wrong!