Is this type of interest deductible?

From: Patrick Bruadair


I bought an old house on a block of land and have had plans prepared for a three unit development. Once completed, I will be retaining all three units for rental i.e. income producing purposes. I haven't rented out the old house while plans for the development were being prepared (it's basically unrentable in its present condition). Because the purchase was for development and subsequent income production, my understanding is that the interest I've paid (and continue to pay) since purchase is deductible (even though I have never rented out the the old house). Is this correct?

rgds

pat
 
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Reply: 1
From: Dale Gatherum-Goss


Hi Pat

There is no "correct" answer to your question unfortunately. The answer should be YES, but, the tax office have taken a liking to disallowing the interest as a capital cost rather than allowing it as an expense.

The big issue in this context is the amount of time that the development takes to bring together.

If you act in a business like manner, you should be able to claim this cost as a tax deduction.

Good luck

Dale
 
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Reply: 1.1
From: Gail H


Hi Pat,

I hope you don't mind if I piggy back onto your thread with a question that has nothing to do with your question.

I am planning to do what you are doing in the forseeable future. I am a little daunted, however, by the logistics of planning a project of that sort. I have been looking for books and info on development/dual occupancy and haven't had much luck.

Basically, I am wondering where/how you worked out how to go about it. Are you just jumping in on your own? Can you recommend any sources of info that tell you how to go about it and how to plan the finances etc. I worry about getting in over my head and am wondering how difficult it is for smaller scale investors to do.

Thanks

Gail
 
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Reply: 1.1.1
From: Mark Laszczuk


Gail,
If I assume correctly, and you're in Melbourne, you might want to give Michael Yardney an email. If you ask real nice, he might be willing to talk to you (let me stress here that he MIGHT want to). He can be contacted at: [email protected]. Again, let me stress that this is just a suggestion, there is no onus on Michael to actually speak to you. (Don't want you to email him expecting him to speak to you becuase I posted on the forum that he would).

Mark
'no hat, some cattle'
 
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Reply: 1.1.2
From: Patrick Bruadair


Gail,
I hold down a full-time job and simply don't have the time to get involved in the details of bringing the development from concept stage through to execution.I have had to leverage resources in the form of an individual who has successfully acted as project manager on similar developments for other individuals in my position. I am however working closely with him to learn the ropes, with a view to being able to manage development projects myself in the future should I so wish.

cheers

Pat
 
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