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IP expense partially paid from borrowed and non-borrowed money.

Discussion in 'Accounting & Tax' started by Ravi, 3rd Jun, 2016.

  1. Ravi

    Ravi Active Member

    Joined:
    31st Jul, 2015
    Posts:
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    Location:
    Sydney
    Hi,

    Say I have $1,000 equity from an IP(in an offset account offsetting loan of this IP).
    Repair expense of $2,000 was taken from equity and personal account ($1000 each).
    Repair guy gave me one single receipt of $2,000 towards repair.


    Question 1 : Do I need to ask maintenance vendor to provide me two receipts of $1,000 each so that
    it is easy to explain to ATO comes tax time? Or ATO will understand and allows mixed receipt?

    Questions 2: I own a duplex which I am planning to subdivide. Is the interest for subdivision cost tax deductible (provided I use borrowed money)?
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Sydney
    1. No. The interest would be deductible to the extent you used the $1k to pay part of the $2k cost.
    2. It is only deductible where the property is available for rent. The interest before rental is non-deductible. If you build to sell you would have an income tax issue and the interest would add to the costs of the property. The interest may reduce the profit (when sold) The subdiv costs arent deductible but also may reduce profit when its sold.
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I concur with my learned friend.
     
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  4. Ravi

    Ravi Active Member

    Joined:
    31st Jul, 2015
    Posts:
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    Location:
    Sydney
    Thanks @Paul@PFI Property will be available for rent. No plans to sell in short term.
    In that case I believe, all below costs should be tax deductible:
    - land holding cost (held it for few months now)
    - interest during construction phase
    - subdivision cost

    is that right?