subdivision and tax

Say I buy a house on 1000m2 for 500k with 400k loan and rent it out. Then I subdivide it into a house on 450m2 and 550m2 land. Say the land will be vacant for few years before I build a house on it.

1. Can I still claim all the interest paid for the 400k loan as tax deductions?
2. Once there are two titles, do I have to change the bank loan as well?
 
Say I buy a house on 1000m2 for 500k with 400k loan and rent it out. Then I subdivide it into a house on 450m2 and 550m2 land. Say the land will be vacant for few years before I build a house on it.

1. Can I still claim all the interest paid for the 400k loan as tax deductions?
2. Once there are two titles, do I have to change the bank loan as well?

Complex tax situation. It could be taxed by 1 or more of 3 different ways. Deductibility and timing of deductions will depend on the circumstances. You should seek professional tax advice.

Bank will probably have titles as security therefore you will need your bank's permission to change the titles.
 
Complex tax situation. It could be taxed by 1 or more of 3 different ways. Deductibility and timing of deductions will depend on the circumstances. You should seek professional tax advice.

Bank will probably have titles as security therefore you will need your bank's permission to change the titles.

Thanks Terry. Yep have to get permission from bank.

There won't be any sales. So no CGT involved. Just wondering whether the interest of the loan (no changes to loan amount, possibly loan security against both titles) can be fully deducted against the income.
 
Bank will probably have titles as security therefore you will need your bank's permission to change the titles.
Would be wise to discuss your plans with broker/bank from the outset before altering the security to avoid any breaches of the loan contract.
 
Thanks Terry. Yep have to get permission from bank.

There won't be any sales. So no CGT involved. Just wondering whether the interest of the loan (no changes to loan amount, possibly loan security against both titles) can be fully deducted against the income.

Developing is complex so you should get some tax advice. There are tax issues even if you don't sell. Probably may not be treated on capital account.

Assuming it is on capital account you would probably be able to claim the interest as it is incurred based on the case of Steele
 
Would be wise to discuss your plans with broker/bank from the outset before altering the security to avoid any breaches of the loan contract.

Definitely Colin. (Btw, the above mentioned is just a scenario but we do have a sub dividable property)

What will your intentions be for the vacant lot?

A house will be built on it.

Developing is complex so you should get some tax advice. There are tax issues even if you don't sell. Probably may not be treated on capital account. Assuming it is on capital account you would probably be able to claim the interest as it is incurred based on the case of Steele

Now it is already getting complex to me :)
 
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