Deductability of interest while building

[chuckee]

Hi,
I have purchased a section under my personal name, and intend to build a residential investment property on it.
I've been paying interest for a few months, and just spoke with my accountant who said that those interest expenses might not be able to be written off, and will have to be capitalized, right up until the house is completed and rented out (i.e. earning income).
He says that the use of a Look Through Company could mean that interest is able to be written off straight away against my personal income.
Does anyone know about this?
Thanks!

[Rosco]

Hi Chuckee,

I would suggest getting a new accountant.

Try one who is a Chartered Accountant, and one that specialises in property investment.

- A normal company, will automatically get an interest deduction.
- An LTC, Trust, partnership or personal names, all have the same rules and need to look at the interest rules. So having an LTC would make no difference.

You can probably guess by my tone, what the real answer is!

Ross

[OneStepCloser]

Hi Ross,

I was also told by my accountant that any expenses before settlement (including interests?) are not deductible. Is that true?
This would be similar to the situation that Chuckee is in?

Thanks.

[Damap]

Chuckee owns it it isn't pre settlement. Sadly most accts are incredibly incompetent, Ross and Gilligan are 2 exceptions.

[Rosco]

Some expenses are a cost of buying or building the house.

But there are different rules for interest!

Interest before settlement?? Is this interest as you settled late? Most likely would be deductible too, depending on what exactly the interest was for!

Ross

[epsomtax]

Hi,
I have purchased a section under my personal name, and intend to build a residential investment property on it.
I've been paying interest for a few months, and just spoke with my accountant who said that those interest expenses might not be able to be written off, and will have to be capitalized, right up until the house is completed and rented out (i.e. earning income).
He says that the use of a Look Through Company could mean that interest is able to be written off straight away against my personal income.
Does anyone know about this?
Thanks!

Totally agree with Rossco. We have obtained two opinions, one from NSATax and one from Brandt Segedin, and both verify that interest and many other related costs can be deducted during the build phase in the circumstance you describe. It is immaterial whether it is done via LTC or not - this doesn't change the deductible nature of those costs. There is a blog post on our website about this...

Regards
Garreth Collard
EpsomTax.com Limited