Hi all.
I bought land last year and am constructing property on it this year. But I had thought that if the property was for an IP then the interest I pay and have been paying on Land and while Construction is tax deductible? I had always thoght this to be true, but I went to see an accountant the other day, He says it’s not. I am surprised, because if the property will be used to earn income then shouldn;t the interest be tax deductible???
Any help on this matter will be much appreciated.
And is it better to look for another accountant..[blink]It is deductible. Refer the accountant to Steele’s case.
From what I have heard I believe it is deductible. Perhaps you need a more up to date accountant.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I thought so.[biggrin]. The accountant obviously needs to educate himself further. Time to look for a better accountant.
How do i refer to the accountant for steele’s case? I remember reading vaguely about it a while ago, was there a link on this forum?You can also refer them to Taxation Ruling 2004/4
http://ww5.cch.com.au/Tax+Rulings/tr2004-4.doc
Interest incurred prior to assessable income
1. It follows from Steele that interest incurred in a period prior to the derivation of relevant assessable income will be ‘incurred in gaining or producing the assessable income’ in the following circumstances:
• the interest is not incurred ‘too soon’, is not preliminary to the income earning activities, and is not a prelude to those activities;
• the interest is not private or domestic;
• the period of interest outgoings prior to the derivation of relevant assessable income is not so long, taking into account the kind of income earning activities involved, that the necessary connection between outgoings and assessable income is lost;
• the interest is incurred with one end in view, the gaining or producing of assessable income; and
• continuing efforts are undertaken in pursuit of that end.Excellent. Thanks for these guys. Make me feel much more better again…
Thanks
I believe this scenario (or similar) is one that can be an effective selection tool when looking for accountants to see whether or not they will cut the mustard as your accoutant.
Derek
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http://www.pis.theinvestorsclub.com.au
0409 882 958There is another interesting recent case, Ormiston v FC of T [2005] AATA 978, where a person had a property for 5 years without renting it out. The owner was still able to claim the interest.
Terryw
Discover Home Loans
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The fact that the tax is deductible is also in the ATO guide for rental properties for the 2004 -2005 year.
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