Hey all,
I want to purchase a block of vacant land, with the intent to put a house on it in 12-15 months time.
Can I claim the interest only repayments, considering that vacant land is classed as an investment until you put a house on it?
Cheers!
— MJ.
My understanding is that until the property/land generates an income you can not claim any costs associated with holding the land eg. rates, interest costs, lawn mowing etc. can not be claimed. Talk with your accountant and until you get a definate answer keep records of your expences
Is the house intended to be an investment property? If so, I think there was a tax ruling or tax determination on this that said deductions were possible.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Land is intended to be a PPOR.
However, if and when I purchase this land (QLD), I’ll be charged stamp duty as if it were an investment.
Is there then a process that if I build a house on it and make it my PPOR, I can claim back some of that stamp duty?
— MJ.
Wouldn’t you have to pay the tax because it’s ‘not’ your PPOR yet?
You areliving somewhere else and cant have two PPOR,until the house is built upon the block. maybe thats why they class it as an investment..stops people from avoiding the tax, saying they are building a PPOR then *change* their minds?
Might have to speak to your accountant?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorJust to add to mja’s question. If you are a company and say you bought 2 blocks of land with intention to build houses on it in 6-8months time. Can you still deduct interest?
Quote:Originally posted by redwing:Wouldn’t you have to pay the tax because it’s ‘not’ your PPOR yet?
You areliving somewhere else and cant have two PPOR,until the house is built upon the block. maybe thats why they class it as an investment..stops people from avoiding the tax, saying they are building a PPOR then *change*
their minds?Yeah, makes sense!
> Might have to speak to your accountant?
I need an accountant first!
Does anyone in the Brisbane (CBD) area have a good accountant in mind who has an interest in property, rather than just crunching numbers?
— MJ.
I have been through all these situation, so I hope these will help:
Ionnie quoted:
“property/land generates an income you can not claim any costs associated with holding the land eg. rates, interest costs, lawn mowing etc. can not be claimed. Talk with your accountant and until you get a definate answer keep records of your expences”.
You are obsolutely correct!MJA quoted:
“However, if and when I purchase this land (QLD), I’ll be charged stamp duty as if it were an investment.Is there then a process that if I build a house on it and make it my PPOR, I can claim back some of that stamp duty?”You are not entitled to claimed the stamp duty back under QLD law as it is treated as an investment property and not place of residency. I know it is not good! I called the State Revenue and was thinking exactly like you before, and I was arguing saying I can’t prove the place is my main residence while is building and need at least 12 mths to complete. I was at that point in time staying with my inlaw place, first time owning a house. But if you really calculate it the stamp duty would be higher as compared to the investment stamp duty (land only) according to my solicitor which is true.
But anyone knows we can claimed back the stamp duty do let me know. I want my money back!
Lily
Hi MJ
Terry is right. There have been previous posts about claiming interest and rates on vacant land until building is complete (within a reasonable time frame) and the answer is that you can claim these costs if the property is to be an IP. See ATO interpretive decision 2001/479 and other related matters.
This does not apply if you are buiding a PPOR. As others have advised, you should have this clarified by a knowledgable accountant. Ours didn’t know about this, so we have since changed. It makes a difference to your cashflow if you do it a few times.
Regards
Wake
I have been advised that I cannot claim anything on my land until I actually build the investment property. I have not pursued it since. If this is wrong, I will be very upset as I am owed a stack of deductible interest.
Robert Bou-Hamdan
Mortgage AdviserRob, You may need some new advice, and then make a back claim for up to the last 4 years.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by The Mortgage Adviser:I have been advised that I cannot claim anything on my land until I actually build the investment property. I have not pursued it since. If this is wrong, I will be very upset as I am owed a stack of deductible interest.
Rob,
I suggest you find yourself a new accountant, as this information you received was incorrect.
The relevant ATO case is Steele vs. FC of T (1999) and the relevant section of legislation is Section 8-1 of the ITAA 1997. Interest charged on vacant land is deductible if the funds were borrowed with the intention to construct an income producing asset.
Some more information here:
http://law.ato.gov.au/atolaw/view.htm?find=%22Steele%22&docid=AID/AID2001307/00001
Best wishes,
Jay.
Jay, I changed accountants a few months back and have not discussed this situation with the new accountant. I will get onto it for sure. I will be paying zero tax next year!!!
Robert Bou-Hamdan
Mortgage AdviserThank you Jay
And here is the tax ruling:
TR 2000/17 “Income tax: deductions for interest following the Steele and Brown decisions”http://law.ato.gov.au/pdf/tr00-017.pdf
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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