During renovation/construction expense deductibility

My accountant has recently confirmed my ability to deduct interest costs, council rates and water rates in relation to the period a residential property was undergoing development/renovation. Purpose of renovation/development was to produce an income producing asset.

Given the above, are property insurance and mortgage insurance expenses deductible as well?

Cheers,
Picket fence

 

lenders mortgage insurance is deductible over 60 months.

 

I wasn't clear enough.

I was referring to mortgage repayment insurance as opposed to Lenders Mortgage Insurance.

 

what does the mortgage repayment insurance cover ? as per the policy. does it also cover death or trauma ?

it may be deductible in full, deductible in part or fully non deductible.

it will depend on what the policy covers.

 

It covers the following: death, trauma, illness, and loss of job

 

It has nothing to do with the property.

If you personally paid it (not in super !) then policy may be partly deductible. The insurer can advise how much is deductible. I regularly see people who think THEY paid premiums in a super account. The super fund claims a deduction NOT the person.

 

Why not ask the tax adviser ?

 

Re: lenders mortgage insurance is deductible over 60 months

I undertstand the same rule applies to broker’s commissions paid.

So what happens if you refinance at the end of construction and break the loan? The balance of the LMI / commission deductible immediately since the loan they pertain to no longer exists?

 

Section 25-25

To continue the example in subsection (2): suppose the original period of the loan is 4 years starting on 1 September 1997. What is the maximum amount you can deduct for the expenditure for 1997-98?

Applying the method statement:

After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure).

After Step 2: the remaining loan period is 4 years from 1 September 1997 (1,461 days).

After Step 3: the result is $1,500 divided by 1,461 = $1.03.

After Step 4: the result is $1.03 multiplied by 302 days = $310.06.

Suppose you repay the loan early, on 31 December 1998. What is the maximum amount you can deduct for the expenditure for 1998-99?

Applying the method statement:

After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure) reduced by $310.06 (the maximum amount you can deduct for 1997-98) = $1,189.94.

After Step 2: the remaining loan period is the period from 1 July 1998 to 31 December 1998 (183 days).

After Step 3: the result is $1,189.94 divided by 183 days = $6.50.

After Step 4: the result is $6.50 multiplied by 183 days = $1,189.94.

 

A broker's commission isn't deductible to the borrower because the lender pays the broker. if the broker charges a fee to the client then this would be a borrowing expense and deductible like LMI.