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 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.