"How would the ATO view this if we build up the LOC loan to from $60K to say $90K? Would it be a issue or does the "clock start ticking" as far as they are concerned from the day it becomes a rental"

A LOC is not much different to a credit limit on a credit card, interest is only applicable to the amount you have spent

This link should be helpful as far as what you can claim goes…

 http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm

Can you claim the cost of repairs you make before you rent out the property?

You cannot claim the cost of repairing defects, damage or deterioration that existed when you obtained the property, even if you carried out these repairs to make the property suitable for renting. This is because these expenses relate to the period before the property became an income producing property.

Example

Stephen needed to do some repairs to a rental property he recently purchased before the first tenants moved in. He paid tradespeople to repaint dirty walls, replace broken light fittings and repair doors on two bedrooms. He also had to have the house treated for damage by white ants.

Because Stephen incurred these expenses to make the property suitable for rental, not while he was using the property to generate rental income, the expenses are capital expenses. This means he cannot claim a deduction for them

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Cheers, Jan