Tax deductibility of interest on ppor when subdividing

Discussion in 'Accounting & Tax' started by shelleykins, 3rd Jun, 2021.

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  1. shelleykins

    shelleykins Well-Known Member

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    Just wondering if a property is subdivided, can some of the interest paid on the original property be claimed as a tax deduction? For example, paying 36k in interest per year currently, if block was divided into 3 (2x200m blocks and original house on 600m block) can part of the interest be transferred to new blocks?
    TIA
     
    shelleykins, 3rd Jun, 2021
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  2. Terry_w

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

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    yes, potentially
     
    Terry_w, 3rd Jun, 2021
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  3. shelleykins

    shelleykins Well-Known Member

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    I know this is overly simplistic but would it be determined by land value at time of purchase as a proportion of new blocks? Eg each new block of 200m can claim $7200 pa in interest in the previous eg of 36k in interest?
     
    shelleykins, 3rd Jun, 2021
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  4. Terry_w

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

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    Terry_w, 3rd Jun, 2021
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  5. shelleykins

    shelleykins Well-Known Member

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    Sorry Terry, I should have known you would have already had a post on this. Thanks heaps!!! :)
     
    shelleykins, 3rd Jun, 2021
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  6. Paul@PAS

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

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    It is highly probable that initially no interest deduction is allowed OTHER than the portion with the original dwelling and provided that portion is used to produce rental income. The original acquisition cost must be apportioned (reg valuer) and therefore any original loan is also apportioned (new use).. Since July 2019 "vacant land" rules deny deductions to holding costs to vacant land. This includes interest. These costs are denied until a later qualifying event allows deductions. Generally when land is subdivided the new portion may be "vacant" even if the subdivision hasnt been made formal. If the vacant land was subdivided tos ell the inteerst for each lot may accrue to its costs to reduce profit on sale.
     
    Paul@PAS, 4th Jun, 2021
    #6