Deducting Capitalized Interest?

Discussion in 'Accounting & Tax' started by smallbuyer, 30th Mar, 2020.

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  1. smallbuyer

    smallbuyer Well-Known Member

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    Hello,

    So if someone takes up one of these 6 month freeze on their loan how is the capitalized interest treated for tax purposes?

    Can one claim interest charged even if you arent actually paying it at this time? If you cant when do you claim it?

    I presume the future interest on the interest is deductible?

    Cheers
     
    smallbuyer, 30th Mar, 2020
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Terry_w, 30th Mar, 2020
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  3. smallbuyer

    smallbuyer Well-Known Member

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    Cheers Terry,
    What about claiming the interest that is charged to your account in the 6 month holiday?
    Is this claimable when charged? This is what ive always assumed as ive based my tax on the interest charged in the FY not the interest paid which can be different as some loans draw in the 1st week on the month which in July would be the next tax year.
     
    smallbuyer, 30th Mar, 2020
    #3
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Interest is incurred when it is debited (charged to the loan). Paying the next day or 18months later doesnt change its deduction timing (that is the credit to the loan).
    Loan repaymnets are never a deduction amount. Only the interest when it is incurred. This is well demonstrated by interest paid in advance.
     
    Paul@PAS, 30th Mar, 2020
    #4