I'm considering buying a vacant lot with the intent to develop in a couple of years, so it is for investment purposes. It is a great unit development site with enough room for 5 units. What I would like to know is there any tax benefits that I can claim?
ie/ would there be any depreciation or the like claimable for a vacant lot?
Is there anything that I should be aware of with purchasing a vacant lot an sitting on it?
Thanks in advance
Yes Wade couple of things.
Firstly getting a high lvr on vacant land without the requirement of having to build on it within a set period of time (i.e 12 months) might be hard than you think.
You cannot claim depreciation on the land and claiming interest on the loan might prove harder than you think given that you dont have any immediate intention to actually build on the land and generate an income from it.
Still have to pay the Council Rates and possibly Land Tax depending on a couple of factors.
This is not to say dont buy and it will prove to be a good long term investment you just need to be aware of the costs.
I will of course assume you know that the site can be developed into what you are looking for.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Wade,
The issue fo rme is getting finance to do the construction when you are ready and meeting development costs in the meantime.
Getting finance for developments is not a piece of cake at the moment. banks often like to see a lot of pre-sales and the ability to get these pre-sales can prove a challenge. Make sure you have a good broker who is working with you all along the process to keep you on finance track as you go. .
Hi Wade.
I'm an accountant and I know that you can claim the interest on the investment loan obtained to purchase land to be used for investment purposes. However, as you do not intend to build the propery immediately, I would suggest you contact the ATO for clarification; in theory, the interest on the investment loan can be claimed.
I did claim interest incurred on the loan to purchase land though the house was under contruction, but not completed.
EM PerthHi Wade,
One of my clients bought some land with the intention to develop as soon as he could, he started getting building plans together and obtaining a DA. He was able to negative gear on this block as there was intention to build a dwelling. However, the advice he received from his account was that if he did not have these plans/milestones he wouldn't have been able to claim the negative gearing.
As there isn't an asset to depreciate, he wasn't able to claim any deprecation.
I would advise checking with your accountant what the ATO deems acceptable time-line's between achieving certain construction milestones.
Alternately, many of my client's purchase a development site where there is an exceptionally old house on it. This house could be worth no more than the cost of demolition, but as long as they're deriving an income from it they can claim negative gearing.
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