Interest paid on land

[sandyfeet]

Hi all,

During the tax year 2013-2014 I purchased land and built villas on them. I thought any interest paid before completion/advertising for tenants was not deductible. Over the weekend, a friend mentioned how they thought that the interest paid on the land portion is tax deductible?

Im sure someone here can answer this quickly for me

Thanks,

 

[DaveM]

Yes you can, so long as you commence the build process in a reasonable timeframe

per ATO/Steele

https://www.ato.gov.au/General/Property/Vacant-land/

Income tax deductions
For land treated as a capital asset, you generally cannot claim income tax deductions for expenses associated with owning it – such as interest on an investment loan – because the land does not generate income. When selling the land, you can add these expenses to the capital cost to work out any capital gain or capital loss.
However, if you buy vacant land with the aim of building a rental dwelling on it, you can claim tax deductions for expenses such as loan interest and council rates. To be entitled to these deductions, you must build the dwelling in a reasonable period of time and make it available for rent as soon as the dwelling is completed.

 

[sandyfeet]

Ok great thanks,

If I settled the land on June 2013 and the build started in November and were tenanted by may/june, would that be considered a 'reasonable timeframe'?

 

[Ausprop]

more than reasonable, I would say remarkable. it gets grey when you go for many years

 

[Paul@PFI]

Council rates, land tax and interest are all deductible when paid under Steele's decision. Review your settlement sheet for the IP land - You may find an adjustment amount that is also deductible.