I was under the impression that there could be no deduction for interest on borrowings for land unless it was income producing. I am wrong.
On a different thread Corsa has written it is the intention for purchasing which is important.,,,,,,,,,,, see below
I apparently can purchase land and then proceed to build an IP at some later date.
The costs associated with the land, and then later the structure, are then deductable as per the tax law.
Interest should not be incurred too soon.......what does that mean exactly?
Connection between outgoings and income producing should not be so long..........what does this mean exactly?
Continuing efforts should be undertaken to produce income ......what does this mean exactly?????
can someone send a link to steeles case as i cant locate on an internet search
Corsa wrote from Interest on Interest
Interest on funds used to purchase a property on which the taxpayer intends to build an income producing asset may be deductible from the time of acquisition of the property (Steele's case).
The key factors to take into consideration include:
the interest is not preliminary to the income earning activities (ie it is not incurred too soon)
the interest is not of a private or domestic nature
ther period prior to the derivation of income is not so long that the required connection between the outgoings and income is lots
the interest is incurred with one end in view, namely the gaining or producing of assessable income
continueing efforts are undertaken in pursuit of that end
Interest should not be incurred too soon.......what does that mean exactly?Click to expand...That you don't sit on the land and wait for years before doing stuff with the land. Ormiston's case was a good example, he took four years but the entire time he was 'renovating' he had an excuse each time about why the property wasn't rented.
Connection between outgoings and income producing should not be so long..........what does this mean exactly?Click to expand...Same answer as the last question you asked.
Continuing efforts should be undertaken to produce income ......what does this mean exactly?????Click to expand...That the land and house would be rented except for some sort of process being undertaken (eg actually building the house, repairing the roof, etc). If you stop actively trying to get the house in a state where it is ready to accept tenants and generate income and cannot come up with a valid excuse (eg broke, personal circumstances), you may lose the ability to claim deductions for the interest.
Can someone send a link to steeles case as i cant locate on an internet search?Click to expand...http://law.ato.gov.au/atolaw/view.htm?locid='JUD/99ATC4242'
Went to tax agent recently and the suggestion was to put in an amendment claim for previous tax year (04 - 05) on top of 05 - 06 claim.
Reason was - we bought land in May 2004, built IP house in 2005, property then rented from Dec 2005 onwards. No tax claim was previously made on property. The intent of the land purchased was for future investment property.
Apparently IP costs associated with land purchase, interest, rates etc. in previous years (tax agent said up tp 4 years) can be considered as deductible expenses
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