New construction - Interest deductions

[curgy]

I will be borrowing over 100% of the cost to cover land purchase to turn key completion for my IP.

1. If I borrow additional funds to cover interest payements during construction, is the additional interest deductable.

2. If I use the loan to cover Council rates, utilities, insurance etc during construction is the interest deductable.

3. If I use the loan to cover property settlement cost (I know property settlement cost are added to the cost base), but is the interest deductable.

4. If I use the loan to cover the loan cost, is the interest deductable, if so can interest be deducted in the 1st year or does the 5 year rule apply.

 

[Terry_w]

I will be borrowing over 100% of the cost to cover land purchase to turn key completion for my IP.

1. If I borrow additional funds to cover interest payements during construction, is the additional interest deductable.

2. If I use the loan to cover Council rates, utilities, insurance etc during construction is the interest deductable.

3. If I use the loan to cover property settlement cost (I know property settlement cost are added to the cost base), but is the interest deductable.

4. If I use the loan to cover the loan cost, is the interest deductable, if so can interest be deducted in the 1st year or does the 5 year rule apply.

The answer to all those is "It could be"

Not sure what you mean by 4 - claiming interest on money borrowed to pay for borrowing expenses? If so this could be claimable each year when incurred.

 

[curgy]

The answer to all those is "It could be"

Not sure what you mean by 4 - claiming interest on money borrowed to pay for borrowing expenses? If so this could be claimable each year when incurred.

Thanks for your reply Terry_w

Originally my reference to "borrowing expenses" was loan establishment cost etc. which I believe can only be claimed over 5 years.
If I borrow against my loan to cover the loan establishment cost, is the interest deductable & if so in the same year or over 5 years ?

Also is the interest paid for the land & building construction fully deductable in the same financial year or needs to be claimed over 5 years ?

 

[Terry_w]

Curgy,

You might be confusing borrowing expenses with interest on money used for borrowing expenses.

eg. $1000 in LMI
This would be deductuble, generally, over 5 years so $200 per year.

If you borrowed $1000 to pay this then the interest would be deductible, generally, when incurred.
so approx $60 each year in interest at 6%.

With stamp duty this is a capital expense so would not be deductible upfront, except in ACT where it is a lease expense.

But you could still claim, generally, interest on money borrowed to pay stamp duty.

Assuming the proeprty will be an investment.