Hi guys,
I have a question to ask regarding the interest payment on housing loan.
If a property was purchased as an investment property other than one’s own residence, the interest payment on the loan cannot be deducted as an expense, due to not being rented out at all. When calculating the capital gains tax, can the interest payment be calculated as the cost base, when the sale of this investment property occurs? For the same matter, how about the rates and taxes too ?Can anyone help me with this issue? Any comments are welcomed. [ohno]
Hi Dragonlady,
Provided the property was available for rent then you are able to claim all relevant costs including loan interest, rates, taxes, insurance, repairs etc.
If however you moved into the property these costs would not be deductible.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Derek,
Thanks for your reply.Perhaps I should explained a bit more about the situation.A property was bought as my own home before I sold my old one.As it took me almost 13 months to sell my old family home ( it exceeded the 6 months window period which was allowed by ATO ).I have moved into my new home and rented the old one while selling. I had elected my old home as my principal residence so I did not have to pay CGT.
I am just wonder when I do sell my new home which I have not rent it out at all but I wll be still liable for CGT on the period I owned the old home before it was sold. Can I claimed the interest payment as cost based then ?
Sorry for the confusion ? Hope you can coment on it ? Many thanks.[eh]Hi Dragonlady,
I must say I am not an accountant and as such it would be worthwhile running the scenario outlined past your accountant too.
As you have exceeded the 6 month dual PPOR clause one of the properties is going to have a 7 months CG liability – in the grand scheme of things this is really quite negligible and as such I wouldn’t be overly worried about which of the two properties is the PPOR in the overlapping period.
To my way of thinking you are better off claiming the interest as a deduction rather than as a capital cost (I don’t bleieve this is possible anyway) as you’ll get the refund now and any subsequent CG liabilities will be in tomorrows $.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Derek, Thanks for your advice. I will consult an accountant when the sale happen. It is a bit messy. Very much appreciated on your comment.[rolleyesanim]
Hi Dragonlady,
No – consult with your accountant before the sale happens. They are the expert and as such they will be able to provide you with a definitive answer and possibly, depdningupon circumstances, may even be able to make a couple of suggestions that may save you money.
Under no circumstaces should you make decisions based on what people (me included) say here without consulting suitably qualified experts who have a detailed understanding of your situation.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Derek,
Thanks again for your sugguestion. Will certainly see an accountant regarding the above issue. Lucky Ihaven’t sold the property yet. will have time to look into it first. In my case, I definitely need some professional advice. Very much appreciated for your help.[thumbsupanim]dragonlady, when you sell the old house, you need to make the election in your tax return as to its PPOR status.
If you decide that it was your PPOR for the whole time (ie you don’t want to have to pay any tax when selling it), then your new house cannot be classed as a PPOR for the overlap period.
If, however you decide that your current house will be your PPOR, you then will have to apportion the CG over the period which you lived in it vs rental period.
As Derek suggested, talk to your accountant about what is best.
It will to a large extent depend on how long you wish to live in your now PPOR…. And also if you plan on selling it in the near (or distant) future.
Cheers
MelHi Melbear.
Very much appreciated for your advice. It is a bit messy but will definitely talk to an accountant before I do anything. Thanks again.
Dragonlady[hair2]To answer your original question (sorry)…
I think I read somewhere that you can add the cost of the interest of your home now whilst it was not your PPOR to the cost base for purchase – but definitely confirm with ATO or your accountant.
I know if you have a holiday house, and don’t rent it, you can add all the expenses (rates, interest etc.) to the cost base for CGT purposes, so I guess this is a similar thing…
Cheers
MelHi Melbear,
Thanks for the additional information. The tax treatmnet of holiday home may apply to my case too. I will certainly bring it up when I consult an accontant. Thanks so much for your time.
Cheers.
Dragonlady[thumbsupanim]
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