Interest costs on land for a new IP

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tumu
Member
@tumu
Join Date: 2010
Post Count: 6
May 5, 2011 - 5:21 am
Hi,
I am thinking of buying a new home and land package for my next IP to maximise depreciation. For this option I have to pay interest costs of land untill the home is completed. Can any one suggests…
1. Is the interest costs of land till completion tax deductible?
2. How much % of new house value will be considered as depreciation? say first 2 years?
Cheers
Tumu.
Jacqui Middleton
Participant
@jacm
Join Date: 2009
Post Count: 2,539
May 5, 2011 - 5:43 am
1. Yes, provided you intend to, and do in fact build and income producing asset, on the land.
http://www.ato.gov.au/individuals/content.aspx?doc=/content/00113233.htm
It would be best to call the ATO and check how long they will allow you to build on the land before the deductibility is no longer allowed.
2. You'll need to hire a Quantity Surveyor to tell you that. Try this mob: http://www.corpred.com.au
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
May 5, 2011 - 12:53 pm
1. Yes, since the case of Steele. I don't think there is a time limit as long as your intention is investment.
2. 2.5% per year for 40 years for building works. Fixtures and fittings can be claimed at a higher rate over a shorter time.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
tumu
Member
@tumu
Join Date: 2010
Post Count: 6
May 7, 2011 - 11:48 am
Thanks very much.
cheers
Tumu