IP still being built, what can I claim?

[Karratha_Guy]

Hi Guys,

Currently my house is still being built! Was really hoping it would have been finished by now but a few delays with finance and the city council screwing up approvals resulted in the situation I am in now.

I am building an IP in Perth, it's 100% for Rental only, went through a developer who deals with IP's etc.

I have been doing some research and from what I can understand I can claim interest as long as property is only used for renting (which it will)

But can I claim borrowing costs and the myriad of other things while the property is still under construction?

Cheers,

 

[HD_ACE]

Did you buy it as a home and loan package? Or as land first? If land how long have you owned it?

Cheers

 

[Karratha_Guy]

House and Land Package as part of a development in December.

 

[Karratha_Guy]

anyone?

 

[westminster]

You can claim interest but some other things are part of CGT calcs and not fully claimable now, some things are apportioned over the next 5yrs.

Do you have an accountant?

 

[Karratha_Guy]

Thanks, I have looked into the LMI etc and that sounds like its apportioned over a few years, yep have an accountant but just wanted to get a heads up so I don't take more paperwork than I need to and just so I know what to expect.

Cheers,

 

[geoffw]

There might be a little depreciation available- I don't know the rules though. I seem to remember the depreciation start date being the day electricity was first connected. But that might have been just because its a date which has been documented.

A depreciation report, which you should get anyway, might clarify.

 

[travelbug]

When you claim tax deductions it is against any income derived from the investment. As you are not earning any income there is nothing to deduct against.
In other words-
You can only claim while the IP is being rented or is available for rent.

If it is still being constructed it is therefore NOT available for rent so you can't claim the interest. WHEN it is available for rent you can claim the interest.

You need to speak to a property savvy accountant ASAP.

 

[Aaron_C]

If it is still being constructed it is therefore NOT available for rent so you can't claim the interest. WHEN it is available for rent you can claim the interest.

You need to speak to a property savvy accountant ASAP.

Oh I'm pretty sure this isn't right....the Steele case showed otherwise. If the intention has always been to rent the property out you can claim the interest costs associated with that.

 

[GaryT]

No problem claiming holding costs as long as long as there was a continuing process showing rental was your eventual intention (even if you subsequently change that intention).

This is even acknowledged in the ATO Rental Properties booklet (around pages 9-11) if you can find it on the new and improved ATO website!

 

[travelbug]

Ok. So I'm thinking it must be different when building then. When buying a place and doing a reno it isn't claimable until the property is available for rent.
Thanks for clearing that up.

That's goood news for the OP then.

 

[Karratha_Guy]

Thanks guys, yeah easy to prove that it's for rental as I have already signed the management authority and got a PM lined up as soon as practical completion comes round it will be advertised. It was all part of the 'package' with the developer.

Thanks for the info, appreciate it

 

[Tillie]

Ok. So I'm thinking it must be different when building then. When buying a place and doing a reno it isn't claimable until the property is available for rent.
Thanks for clearing that up.

That's goood news for the OP then.

Actually Ato booklet indicates that the holding costs during Reno time is also tax deductible if the intention is to rent the property out after Reno. Check the pages 9 - 11 in regal property booklet.

However the booklet was not clear if only interest is tax deductible or also rates and other taxes. Does anyone here have experience claiming other costs than interest?

 

[GaryT]

However the booklet was not clear if only interest is tax deductible or also rates and other taxes. Does anyone here have experience claiming other costs than interest?

Not sure if you are reading the correct booklet but is says on page 7 of Rental Properties 2012 "You can claim expenditure such as interest on loans, local council, water and sewage rates, land taxes and emergency services levy on land on which you have purchased to build a rental property or incurred during renovations to a property you intend to rent out. However, you cannot claim deductions from the time your intention changes, for example if you decide to use the property for private purposes."

This is based on Steele's and also Ormiston's case. So OK to claim all holding costs.

 

[Tillie]

Thanks a lot Gary!