Interest Incurred during construction of an Investment property

[saleemn]

A quick question. The interest incurred during the construction stage of an Investment property is to be capitalised as there is no income or it can be claimed as expenses.

Thanks

[Rosco]

Hi Saleemn,

I would suggest you use a chartered accountant who specialises in property, as some other great tips for newly built investment properties.

To answer your question, interest has slightly different rules so as long as it is going to be a rental property, the interest can be claimed as a deduction.

Ross

[Bluecoat]

Hi Saleemn,

I would suggest you use a chartered accountant who specialises in property, as some other great tips for newly built investment properties.

To answer your question, interest has slightly different rules so as long as it is going to be a rental property, the interest can be claimed as a deduction.

Ross

I would have thought only when you are start earning income not before- anything else is capitalised

[Rosco]

You would have thought wrong. As I put above, Interest has slightly different rules and is governed by

DB 6 Interest: not capital expenditure

Deduction

(1)
A person is allowed a deduction for interest incurred.


Exclusion

(2)
Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.


Conduit financing arrangements[Repealed]

(3)
[Repealed]
Link with subpart DA

(4)
This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.



Defined in this Act: capital limitation, deduction, general limitation, general permission, interest
Compare: 2004 No 35 s DB 6
Section DB 6(3) heading: repealed (with effect on 30 June 2009), on 6 October 2009, pursuant to section 69(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section DB 6(3): repealed (with effect on 30 June 2009), on 6 October 2009, by section 69(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

[sidinz]

I would have thought only when you are start earning income not before- anything else is capitalised

I was told recently, along the same lines as Ross's comments above, that the interest on my recently-purchased buy and hold is deductible while I renovate it. I was surprised, but there you go.

[Wayne]

I was told recently, along the same lines as Ross's comments above, that the interest on my recently-purchased buy and hold is deductible while I renovate it. I was surprised, but there you go.

That's why accountants are useful