'the interest you pay on the deposit is tax deductible?

[smy7484]

A very complicated tax issue happened years ago:

I have signed Contract for Sale for off the plan unit purchase on 2009, which is due to be completed by the end of 2010. I have taken out a personal loan from ANZ bank to pay for the 10% deposit required at that time. I have then repaid the interest charged on the personal loan by July 2010. The unit completed on Nov 2010, and rented out straight after by my property manager.

My accountant has advised me that interest charged for my personal loan, which was used as a deposit, IS NOT TAX DEDUCTIBLE. It is considered as purchase / borrowing cost for the investment property, which can only be deducted from capital gain cost when you sell. Is this correct?

However an article I read regarding tax written 'the interest you pay on the deposit is tax deductible if you intend renting the unit out on completion'. for off the plan purchase.

I am confused which one is correct. I have lodged my previous tax return as the interest charged for the personal loan as non tax deductible.

Thank you

 

[Mry]

Here is the ATO's Rental Properties 2011 book.

http://www.ato.gov.au/content/downloads/IND00270214N17290611.pdf

Page 7
"Expenses prior to property being available for rent"
'You can claim expenditure such as interest on loans,
local council, water and sewage rates, land taxes and
emergency services levy on land on which you have
purchased to build a rental property or incurred during
renovations to a property you intend to rent out.'

You can also show a PBR from the ATO on this subject as well.
http://www.ato.gov.au/corporate/content.aspx?doc=/rba/content/1012007377179.htm

Are you able to claim a deduction for interest expenses incurred on a loan to purchase land on which you intended building rental properties, prior to the derivation of assessable rental income from that property, until your intention changed to build your main residence on the land?

Yes.

That should be evidence enough for any accountant.