Interest deductible on home loan

If i bought a place as investment, paid the interest in advance for a year and claim it for this financial year. What if i change my mind and decide i want to move into it?

Would the interest still be deductible? i have not nominated any place to a PPOR
 
I'd say you would need to go back to your accountant and have them amend your tax return for the previous year, or wait for the ATO to catch up with you.....
 
If i bought a place as investment, paid the interest in advance for a year and claim it for this financial year. What if i change my mind and decide i want to move into it?

Would the interest still be deductible? i have not nominated any place to a PPOR

Did you prepay last year fully intending the property to be used as an IP, but circumstances have changed.

Or are you hypothetically asking if you could prepay THIS YEAR when you are unsure if you will change your mind next year.

Two VERY different scenarios.

Cheers,

Rob
 
i prepaied this financial year (2009/2010) 24K on settlement to offset capital gains on other properties.

I called the ATO and Anyway i explained my situation as the intention is to do up the place slowly and then rent it out later down the track. or sell in a year's time. They claimed the intention which is what i intended it to be.. meaning i had a investment loan and had tenants in but they left so i decided to work on it. They explained how they could claim interest on a home loan on a vacant block of land etc.

Gave me a reference number so it is good i can claim interest on it.

I would have written in to get a tax ruling but then that is 28 days.. by then it would be pointless
 
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i prepaied this financial year (2009/2010) 24K on settlement to offset capital gains on other properties.

I called the ATO and Anyway i explained my situation as the intention is to do up the place slowly and then rent it out later down the track. or sell in a year's time. They claimed the intention which is what i intended it to be.. meaning i had a investment loan and had tenants in but they left so i decided to work on it. They explained how they could claim interest on a home loan on a vacant block of land etc.

Gave me a reference number so it is good i can claim interest on it.

I would have written in to get a tax ruling but then that is 28 days.. by then it would be pointless

If you purchased a property with tenants and an intention to keep renting then this was an IP at the time so prepaying interest was "incurred" at the time of payment. TR 97/7 example 3.

If you had prepaid LAST YEAR then it not be an assessable recoupment and if you had sold it there would not need to amend last year's tax return.

However, where you move into the property there is a statement by Toohey J. in FCT v Ilbery stating that deductions in relation to prepaid interest would not be deductible.

Given that your tax return is not out of its 2 year amendment period (it hasn’t even been lodged yet), it sounds like you need to ask again if you move back in.

If the place is now unintentionally empty but you are committed at all times to repair/improve to rent again then when interest becomes due again you can claim further interest deductions.

However you have raised a couple of concerns:

A) My worry is that your first post enquired about intention to make it your PPOR.

B) The above statement "do up the place slowly and then rent it out later down the track" sounds like less than a current activity and more like a future activity since it lacks an element of current commitment.

C) Your statement " . or sell in a year's time ” means that you cannot deduct expenses where you hold the property for the purpose of deriving a capital gain, s.51AAA.

From your comments, I am unconvinced about your motives being sufficient to keep claiming further deductions at the moment.

Getting an ATO verbal opinion with a reference number does not protect you from penalties should you be audited.

Better pay an Accountant for some advice specific to your exact circumstances.

Cheers,

Rob
 
If you purchased a property with tenants and an intention to keep renting then this was an IP at the time so prepaying interest was "incurred" at the time of payment. TR 97/7 example 3.

If you had prepaid LAST YEAR then it not be an assessable recoupment and if you had sold it there would not need to amend last year's tax return.

However, where you move into the property there is a statement by Toohey J. in FCT v Ilbery stating that deductions in relation to prepaid interest would not be deductible.

Given that your tax return is not out of its 2 year amendment period (it hasn’t even been lodged yet), it sounds like you need to ask again if you move back in.

If the place is now unintentionally empty but you are committed at all times to repair/improve to rent again then when interest becomes due again you can claim further interest deductions.

However you have raised a couple of concerns:

A) My worry is that your first post enquired about intention to make it your PPOR.

B) The above statement "do up the place slowly and then rent it out later down the track" sounds like less than a current activity and more like a future activity since it lacks an element of current commitment.

C) Your statement " . or sell in a year's time ” means that you cannot deduct expenses where you hold the property for the purpose of deriving a capital gain, s.51AAA.

From your comments, I am unconvinced about your motives being sufficient to keep claiming further deductions at the moment.

Getting an ATO verbal opinion with a reference number does not protect you from penalties should you be audited.

Better pay an Accountant for some advice specific to your exact circumstances.

Cheers,

Rob

You sound like an accountant. I did not nominate it as PPOR . I prepaid my interest at settlement June 2010 after the tenants decided to not extend their lease which then i considered moving to do up the place.

I also organize a buildling permit to do some internal renovations and will be later putting up an advertisement to rent it out.

I cannot deduct interest? if i rent it out and sell in a year's time - i can deduct the interest and sell the place with the tenancy. i can't deduct the capital works, improvements but that will be used in calculating the capital gain or loss. i have not claimed any further deductions if that is what you wish to imply. All these are subjective as non of these have occurred. The only thing that has occured is that i paid my interest in advance in June 2010 when settlement occured and the tenants moved out.

I explained my case clearly to the ATO person - as for penalties - i am doing the right thing. If the circumstances . i have sufficient documentation on my intentions etc. Besides i have been audited before and cleared. A lot of deductions are subjective on situations. Penalties are high for people who don't disclose income.
 
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