Basic interest deductibility question

I really feel these are situations that come up all the time, but I haven't been able to google my way through to a clear answer. Perhaps I'm just overthinking things.

Say I have an IP that needs a reno, so I do not actively look for tenants for say, three weeks, while it gets done. Does the interest on the loan remains deductible during this period? I would have thought it does, but tax returns have something like "number of weeks available for rent during the financial year", and technically it was not really available to rent during three of them. I suppose it could have been, except no-one really wants to live in a house while it's being repainted, etc.

Second question is along the same lines. I decide to sell an IP, but want to "pretty it up" before the sale, and then the sale period itself takes (say) eight weeks. Does interest on the loan remain deductible during this time? Again I feel that it should, but it's not backed by anything definite. Or should I add it to the cost base instead?

Note I am aware of the "repairs vs capital improvements" issues, and this is not one of those questions - this is just about the interest on the loan.

Any advice appreciated.

 

1. At the moment yes interest could be deductible.

2. Not deductible. Cost base.

 

If you are not actively looking for tenants, or having it available to rent , how can you claim a deduction for that period, or not apportion it to all the yearly costs that are claimable.

 

If you are renovating a property with the intention of using it for rental income the interest is deductible. The interest is incurred to produce taxable rental income - albeit future rental income.

 

So if I am in between tenants and decide to slowly renovate the property then you are saying I dont need to mention it in the tax return that it was unable to be rented out.

 

It depends on how “slowly” you intend to renovate.
Marg

 

You need to have an active intention (shown by actions) of renovating a property so it can generate rental income run the holding costs are currently tax deductible.

If you are land banking then their is a chance that the interest is capital in nature.

 

If my painter took 3 weeks to paint a house that I used to produce income I certainly would be asking questions .
Then the second part is the specific question in the tax forms regarding "number of weeks available to rent", is this open to interpretation dependent upon professional advice or a straight out question. .

 

Thanks for replies so far - it seems like it might not be as "basic" a question as I'd anticipated. It looks like opinions are leaning towards terry_w's answer, with some contra.

Note: I said "renovate", not "paint". There's potentially a lot more to renovating than slapping on a coat or two of paint.

 

The renovation costs would be non deductible. Even if it was a repair cost (which a renovation may not be) the repair relates to pre-rental wear and tear.

The interest may be deductible if the intent is to rent however the time for that to commence that intention may be subjective. The ATO would likely consider only from the date the property is available for rent. Preparing a property to rent and being available are not the same thing.

I beleive personal tax advice rather than forum posts are the best avenue.

 

I know it wasn't totally clear in the post, but this is between tenants, not a new purchase. I am already reasonably clear on the repair/capital works distinction as already stated. Appreciated anyway.

And I do agree personal tax advice is obviously the best - I just thought it was a really basic question that I just hadn't been able to find an answer to. Prior to asking, I did not think it would be up for such debate.

 

Sounds straight forward