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Interest deductibility on spare car park for rent?

Discussion in 'Accounting & Tax' started by HappyBrizzie, 10th Oct, 2015.

  1. HappyBrizzie

    HappyBrizzie New Member

    Joined:
    5th Oct, 2015
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    Location:
    Sydney
    Hi

    I have a spare car park for rent in my owner occupied apartment building's secured car park. Obviously because it is a secured car park, the only market pool would be the apartment's residents and this cannot be changed.

    Because the market pool is limited, I envision it may be awhile before I can find anyone who would rent the car park space. The suburb does have a many on street parking available.

    Still, I intend on renting out the car park as it is surplus to my needs. Question is, if the space remains un-rented for prolonged periods of time, even if I continuously advertise for rent, is my mortgage interest deductible over the periods when it is not successfully rented out?

    Technically it would seem so, as it would be the same as having a spare bedroom to rent whether or not it is successfully rented out. But because it is a car park, in the above circumstance of perhaps prolonged periods of vacancy in which an owner could potentially personally utilise and yet claim tax deductibility, would it make it a difference to the tax office's view of it?

    Curious... any thoughts welcome. Thanking you in advance all you experts on this forum.

    PS: I do realise it will later on attract capital gains tax on the same proportion of it.
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    13th Jun, 2015
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    Location:
    Adelaide, SA
    Important question - is the car park on same title as your home or separate?

    If same, then it's treated exactly like renting a room out:
    - declare income
    - claim proportion of interest , rates, insurance, etc
    - affect free CGT status.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sydney
    No. The carpark would not be advertised to the general public and has limited potential tenants so the interest could not be deductible in full. It may be deductible in part possibly. If you own a car it would be even worse because you could possibly be using it too!

    I suggest you search the ATO legal database on holiday houses as there are some rulings and other ATO publications dicussing similar issues. Some people have been known to half heartedly advertise for tenants in the hope of not finding them so they could claim the interest.
     
    legallyblonde likes this.
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    18th Jun, 2015
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    Location:
    Sydney
    At best a small % may be deductible however the question did ask if you were to advertise it so that... looks to answer itself. The proportioning would likely be trivial unless this is prime cit real estate. Its currently a exempt asset under the main res exemption. Why complicate that for a few bucks that may or may not occur.