Interest Costs during renovation for Rental

[SliderC]

Hi Everyone,

Scenario:

Bought an investment in QLD, performing some renovations to improve rental.

* Replacing Bathroom
* Replacing Doors, door handles
* Installing dishwasher
* Tiling living areas

Question:
* The renos have taken a couple of weeks during which I have paid interest. Is this interest tax deductable?

* The costs for renovation, I plan on doing a depreciation report before EOFY however wondering, when it comes to capital costs vs depreciatable items, should I be itemising my invoices to and removing all depreciatable items with the remainder being capital costs? Any advise on the items above?

Cheers!

Cheers,

 

[Paul@PFI]

1. No. The period during which the capital works are being completed (initial repairs and improvements) the property cannot be available for rent. Hence these interest for that period adds to the CGT cost base.

2. Keep records of the work performed and cost. Then get a QS report. They will deliver far better identification of depreciation and capital allowance deductions than you. They know what can be allocated to a pool to bring fwd deductions etc.

All of the above should be diligently recorded in the CGT records for the property as they will reduce future potential CGT one day. Many taxpayers keep poor CGT records and seek to recreate them later with the obvious loss of important costs which would save them 50cents in the dollar from tax.

Example see my 2014 IP spreadsheet and the detailed CGT record.