What if circumstances change the "intention"

A question with a hypothetical case:

I'm building a new house with the "intention" of making it an IP and not the PPOR. The building process takes 2 years and in those 2 yrs I claim my interest on loan in tax.
When the property is complete, my circumstances change and instead of keeping the property on rent, I start living in it.

Do I need to give the tax benefit back to ato from the 2 years of construction phase? Is there any rule with which I can prove my true intention and don't have pay back the money to ato? Is ther any time-limit for keeping this property on rent before making it PPOR?

Regards
Sanjay
 
Not actually. I think I need to make my question more clear:

I can claim tax deduction on the interest paid on loan of a new property in the building phase only when I have the "intention" to make that property for income generating asset i.e. putting it on rent after it completes. If I am bulding the property with the intention of making it for my PPOR, I can't claim tax deduction during the building period.
So...the question is what happens if my circumstances change and I start living in the property just after it is completed and handed-over to me, instead of putting it on rent?

Regards
Sanjay
 
I believe that you will not have to repay deductions, but as it was an IP before becoming a PPOR CGT will be payable upon sale for the period it was an IP.

I am unsure what this will be based on, if it is on build price or end valuation. Probably end valuation. This is a question for your accountant.

Sunshine

I couldn't express this very well last night - so just deleted post
 
there is no rule to prove intention - it is all about what you did, said, emails you may have, how the circumstances fit etc
 
Thanx for the replies.
So....the Taxman doesn't have any method to "pick" the people with their fake (if there is any, in this case) intention?:eek:
 
You mean does the ATO have methods apart from tracking down people who post their true intentions on forums on a website ...

:)

But I'm sure there are plenty of Sanjays in Whyalla who are currently building houses ...
 
Ha ha ha.......I wish you were correct jrc.:D
Fortunately, I don't believe in building houses. My interest is to buy old house on a big land (subdividable) now.........and develop/subdivide them in 5 yrs time. Currently, I'm full time employee but thinking of being a full time property developer in 5 yrs.
The question was asked by a friend who lives in Whyalla but wants to build in Adelaide.:)
 
I've fielded this question before. Because it is merely 'intent' that drives whether a person can claim a deduction for a property that is being built, some clever people thought that you can claim a deduction for interest on a property being built, and then just as it is finished, change intent from renting it out to living in there and move in.

Yes, you can do it.

There are only 3 things to note here.
1 - You would have to document your original intent and provide solid evidence of factors that effected your change of intent. Good luck with that.
2 - If your original intent was to sell the property rather than rent it out on completion, changing your intent would actually be considered as a disposal of trading stock at market value and an acquisition of it as a capital asset.
3 - I wouldn't do this more than once.
 
You mean does the ATO have methods apart from tracking down people who post their true intentions on forums on a website ...

:)

But I'm sure there are plenty of Sanjays in Whyalla who are currently building houses ...

:D Big brother!:eek: And probably is watching too! At least I am a common house moggie!
 
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