LOC interest - deductible?

[neil100]

Hi all,

I have searched the forums, and found partial answers to my questions, but i'm still not sure I fully understand.

If I have a LOC against my PPOR, and I have used the PPOR only for activities related to my IP properties, then I can claim the interest as a tax deduction - is it that straight forward ?

Now, some of the payments from this LOC have been used for

1. Deposit on IP1 - settled Sept 2009
2. Deposit on IP2 - Settles approx July 30 2010
3. Building / pest reports on IP1
4. Building / pest reports on a property I didn't end up buying.
5. Payment of home loan interest on IP1
6. Depreciation report IP1
7. Body Corp fees IP1
8. Council Rates / Water - IP1
9. Conveyancing fees - IP1.

Do any of the above complicate in any way, my simple view (stated above) of the tax deductions I can claim?

Thanks.
Neil

 

[Terryw]

Do you mean you have only used the LOC to borrow funds for IP related matters? If so then the interest on these borrowed funds should be deductible.

 

[boods99]

All are claimable apart from no. 4 which is a little iffy...

Which IP would you claim this against considering the fact you did not buy the property in question....

Scratching my head here should probably know the answer to this...

Boods

 

[wokka1]

I reckon if Property investment were your sole "Business" No 4 would be do-able. It would be a cost of doing that business.

 

[Rob Williams]

Not sure why anyone would think that building and pest inspection was deductable, regardless of the outcome of the deal.
Acqusition costs such as stamp duty, conveyancing, legal fees related to the purchase, pre purchase travel costs and pre purchase inspections are not deductable.
They are clearly not expenses related to earning income.
Those expenses don't arise until AFTER you own the property.

 

[neil100]

Not sure why anyone would think that building and pest inspection was deductable, regardless of the outcome of the deal.
Acqusition costs such as stamp duty, conveyancing, legal fees related to the purchase, pre purchase travel costs and pre purchase inspections are not deductable.
They are clearly not expenses related to earning income.
Those expenses don't arise until AFTER you own the property.

Hi Rob, no, i'm asking if ALL the interest is deductible given some of the costs (like building and pest inspection for a property I didn;t complete on) were paid for out of the LOC, and therefore contributed to the interest amount.

I reckon if Property investment were your sole "Business" No 4 would be do-able. It would be a cost of doing that business.

Hi Wokka, i'm not in business per se, rather the LOC as set up solely for IP purchase costs.

All are claimable apart from no. 4 which is a little iffy...

Boods

Yes, I'm not sure either. Similarly, there was a small conveyancing fee (paid out of the LOC) for this purchase that didn't go through, so the same question applies.

Do you mean you have only used the LOC to borrow funds for IP related matters? If so then the interest on these borrowed funds should be deductible.

Hi Terry - yes, that is what I mean.

 

[Rob Williams]

Hi Rob, no, i'm asking if ALL the interest is deductible given some of the costs (like building and pest inspection for a property I didn;t complete on) were paid for out of the LOC, and therefore contributed to the interest amount.

My comments weren't directed at your post.
Interest expenses related to the purchase of an income producing asset are deductable, therefore, one would have to take the view that interest related to the a property that was not purchased would not be deductable.
As always, if you want the best advice, see your accountant.

 

[wokka1]

My comments weren't directed at your post.
.

Rob's comment was for my post.

Inspections are added to the capital cost or cost base if the purchase goes ahead, so no. No tax deduction.

Rob... I know it doesn't apply in this case but if someone makes a living from property investing, lists their occupation on their tax return as "property investor" and has no other significant source of income...would inspections not resulting in a purchase, be a business expense and therefore deductible ?

Any accountants or anyone fitting the above description available for comment ?

 

[Rob G.]

Look up definition of a business in s.995-1 ITAA97.

Cheers,

Rob