LMI & Insterest deductions for House & Land Pkge

Hi all,

I am buying a House & Land Package to build and Investment Property on it, the details as follow, to get a better idea:

Land Contract Price: $343,000……...(a)
Building Contract Price: $220,000….(b)

Total Purchase Price (a+b): $563,000….. (c)
Stam Duty: $10,500…(d)
Misc Cost: $3,000…...(e)

Total Funds to Purchase (c+d+e): $576,500….(f)
Total Funds from me: $41,500…(g)

Loan Amount (95% x (c)) : $535,000…..(h)
LMI : $18,900……………………...(i)
Total Loan Amount (h+i) : $553,900……(k)
Total Interest Repayments at 5.13% Construction Loan IO: $553,900 x 5.13% = $28,415 per year….. (m)

(The interest repayments will increase from when is Land only repayments up to Land and Building together… so these repayments will increase gradually depending on Building breakdown payments funded by Bank over construction period)

The questions here are:

1) Can I claim as Tax deduction, the whole LMI ($18,900) as Borrowing Cost, split proportionally during 5 years as soon as the Land Loan is funded?, I mean before they even start with Building Construction?. Or do I have to wait all the way until Building Construction is finished and tenants move in to claim these Borrowing Cost on Tax?

2) Can I claim as Tax deduction, the interest repayments for Land Loan and Building Loan as they are progressively charged by the Bank (a mean from day 1)? or do I have to wait all the way until they finish Building Construction and get tenants on it to claim these interests?

3) I will be paying interest on LMI (the LMI is part of Total Loan, as you can see above); Can I claim this LMI interest from day one and at the same time claim the LMI cost ($18900) as borrowing cost over 5 years (point 1)?


Your answers will be greatly appreciated and if you can refer to specific examples or ATO rules links, even better… I couldn’t find specific examples on ATO website or the forum myself.

Thanks in advance,
 
1) I believe so if the intention is always to rent it out.
2) Yes, if the intention is to rent it out.
3) Yes, if the intention is to rent it out.
 
specifically Steele v ATO has clear guidelines which would suggest that your borrowing will be deductible ( under normal rules ) from date of settlement

ta
rolf
 
Hi all,

Can I apply to ATO for a PayG Withholding Variation right now (doing a forecast estimate of the interest I would pay during this construction year)? or do I have to wait until Land settlement in August'13 to submit this application?
 
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