Selling property, 12 month of interest in advance

Discussion in 'Accounting & Tax' started by CargoCult, 12th May, 2016.

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  1. CargoCult

    CargoCult Member

    26th Feb, 2016
    If I have pre-paid up to 12 months interest in advance on an investment property loan, could there be a taxation issue if I decide to sell the property midway through the pre-paid term?

    1. From the bank's perspective, I believe I would just be issued a refund of the pre-paid interest at settlement, correct?

    2. From taxation perspective, let's say the property will be on the market for selling for a few months, thus not tenanted and not available for rent until settlement. Is the interest charged during that vacancy period still tax deductible?
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

    18th Jun, 2015
    Yes. Its a 12mth fixed rate. The loan would be cut on sale and penalties applied but these would be a CGT adjustment not a deduction. Then the bank would owe you some of the interest paid in advance. That would become assessable.

    1. Yes and it would be assessable income
    2. No.