Deduction on interest on the loan incurred on an investment property – MAS Tax Accountants Mascot.
Deduction on interest on the loan incurred on an investment property is only allowable when there is a clear proof that the principal loan fund is borrowed to fund an income/rental producing asset. The interest is only deductible when the property has been rented out or available for rental.
When purchasing a land for building a rental property, the interest on the loan will be deductible from the time the loan has started. Unfortunately, the deduction on the interest on the loan will not be claimable when your intention changes and the property is not used to produce the rental income.
Some other examples when the interest charged on a loan for a rental property is deductible:
- for purchasing a depreciating assets,
- for renovations,
- for repairs.
Sometimes a loan may be used to purchase both a rental property and a private car. In this kind of scenario, the interest on the loan must be apportioned into deductible and non-deductible parts that are coincided with the amounts borrowed for the rental property and for private purposes.
Lastly, another scenario is when owners borrow money to buy a new home and then rent out their previous home, then the interest of the outstanding loan on the old home which is used to produce rental income will be deductible. However, an interest deduction will not be available for the portion used to purchase the new home.
Speak to your MAS Tax Accountants Mascot to work out the deduction on interest on the loan that is related to investment property and also assist you to come up with the proper documentations for justifying the claims.
For an appointment, or a confidential discussion of your needs, please contact our Mascot Tax Agents today, or call 1300 627 829.
