help and ideas on purchasing land as investment

Hi , nope you cannot claim any interest on vacant land, the only way you can claim interest is if you buy a house or unit and rent it out to someone then you can negative gear it. As to your other question, with the price of land , maybe for a little extra you could buy a 1-2 bedroom apartment of flat somewhere close to the city? Then you could use it for tax purposes too, where in australia are u thinking of buying tho? If you are thinking of perth where I live i would suggest dont buy anything at the moment because i think the market may take abit of a dive as there is way too much for sale and no buyers. As far as land investment goes too I would suggest you will not make a quick buck in this market and u would want to be prepared to hold onto the land for a very long time, an example, I bought a block about 1 year and a half ago when perth had a supposedly 'land shortage' . I ended up buying a block in the northern suburbs, 500sqm and close to a shopping centre, I paid 195000 for it,  I thought i would hold onto it for a while then sell it as I thought i picked it up for a good price, I paid interest only on the loan and after a year I put it on the market, I was hoping to get 260 000 or atleast 250 000, 6 months later I sold it at a price where when i added everything up i barely broke even. Problem i had was there was way to much land for sale and no one buying land plus all the developers couldnt sell land either so there all offering incentives to buy land off them because even if the markets quiet they still need to keep selling land. And they are also dropping the price, before i bought my block i looked at an estate in butler (outer northern suburbs of perth) and for a decent size block u would be looking at around 210-230 range, now in todays paper satterley is advertising they are releasing blocks in the 500-600sqm size for 180000- 190000. So basically anyone that bought land off them a year ago going by those prices would have lost 20-30 grand atleast.

Hi,

I disagree about the deductability of interest on land.

Provided the land was bought for investment purposes – that is, with the view to making a profit – then why wouldn't the interest be tax deductible?

To quote from the tax ruling
 
6. The deductibility of interest is typically determined through an examination of the purpose of the borrowing and the use to which the borrowed funds are put

Furthermore, the tests put forward in the tax ruling are:

9. 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.

I would say therefore that there needs to be some clear nexus between the property and the intended future assessable income. For this reason, I would see an tax accountant before buying the property.

In summary, there mere fact that you are buying land will not preclude you from gaining a tax deduction for the interest, however it does raise questions that need consideration and planning with a good tax accountant.

Cheers,

Yes you certainly can claim interest on land if you are intending to build a rental property. You can claim all the usual costs too such as rates etc.