using h/e loan for reno's?

[suzieq]

Hi guys,

Just a quick question - We have a Home Equity Loan which we use for investing purposes only (Shares, IP's ect..). Just wondering if we can use this loan for all our renovation costs on a new IP that we've bought, to bring it up to a rentable standard and tax deduct the interest on the amount we will be taking from the H/E loan. I am aware that the reno's themselves are not tax deductable but thought that the interest on money borrowed to do the reno's may be?

SQ

 

[abcdiamond]

Yes, you should be able to claim the interest on the money borrowed to do the reno's. Just keep the appropriate records.

If you have to borrow for any allowable IP expense, then the interest is allowable also.

You say the reno's themselves are not tax deductible: They actually are; in the form of depreciation whilst you keep the property, and then the balance set of against the GC when you sell the property, to reduce your CGT.

 

[dags]

in regards to renos as a tax deduction.....

can you claim for materials purchased?( a percentage of)

what if you register as a builder?

any little tricks in this scenario?

what is the best way to gain from renos by way of tax deductions?

 

[Rolf Latham]

Hiya

New IP ? That will cause some confusion on the deductability not of the interest BUT the actual costs.

If I recall correctly, your reno is a capital improvment and is therefore not deductible or depreciable. Rather its added to the cost base and reduces the amount of CGT payable ?

Ta

rolf

 

[geoffw]

Originally posted by Rolf Latham
If I recall correctly, your reno is a capital improvment and is therefore not deductible or depreciable. Rather its added to the cost base and reduces the amount of CGT payable ?

I was under the impression that an improvement was depreciable- in the same way that the purchase of a house and its inclusions were depreciable.

So, for instance, If I bult a garage, I could not claim the cost of the garage as a deduction, I could deprecfiate it- presumable at the building depreciation rate of 2.5%.

 

[Rolf Latham]

Hi GW

Thats why we have Dale .................................. which is it Dale, or is ti one of these things thats clear as mud

Ta

rolf

 

[Brenda Irwin]

On TV the other nite they were saying that any reno's done by previous owners from 1992 onwards would be depreciable at 2.5% by the new owners.

Therefore I would argue that any reno's done by the new owner would also be depreciable at 2.5%.

Unfortunately it just takes 40 yrs to claim it all back.

Am I correct Dale?

 

[DaleGG]

Hi

As a rule, most renovation work is written off over 40 years at 2.5% of the cost of the reno. However, some of the items can be identified and written off over a shorter period.

Dale

 

[geoffw]

Originally posted by DaleGG
Hi

As a rule, most renovation work is written off over 40 years at 2.5% of the cost of the reno. However, some of the items can be identified and written off over a shorter period.

Dale

Thanks Dale.

I assume that the regular schedule for depreciaition does apply to improvements as well as to existing items.

So that if, for instance, I had painted, and added floorboard laminate and a stove, the the painting is depreciable at building rate, and the other items at whatever rate the ATO allowed for other inclusions (assuming they did allow them as separately depreciable items).

 

[DaleGG]

Hi Geoff

Yes, that is correct.

Dale

Originally posted by geoffw
Thanks Dale.

I assume that the regular schedule for depreciaition does apply to improvements as well as to existing items.

So that if, for instance, I had painted, and added floorboard laminate and a stove, the the painting is depreciable at building rate, and the other items at whatever rate the ATO allowed for other inclusions (assuming they did allow them as separately depreciable items).

 

[suzieq]

Thanks to all of you for your responses. We are about to embark on our first ever reno.......can't wait!! SQ