Tax deductibility scenario

In Sep 2020 we got a loan from lender A for a piece of land where we want to build an IP and obviously started paying interest.
In Jan 2021 the lender A refused to provide finance and we started a process of refinancing the loan from A to B. This ended up successfully in June 2021 and it is very likely that the construction activities would start in July or Aug 2021.
When a house is built, it would be rented out.

therefore, from Sep 2020 to June 2021 we paid interest with a clear intent to convert the property from land into IP when the house is constructed.

My question is if this interest is tax deductible and treated as normal expenses incurred for IPs during financial year? If it is, what about further expenses, such as refinancing from A to B?

 

I’m pretty sure it isn’t. However, I think the interest can be added to your cost base when selling.
As far as I know, I don’t think the interest is deductible during construction either. I could be wrong- best to check with your accountant.

 

Laws changed a few year ago. No longer deductible until habitable

 

From 1st July 2019 interest for vacant land holding costs (incl interest) is not deductible aftre the dwelling is completed and an occ cert issued AND its available for leasing. The old "Steele's decision" issue which used to allow deductions now only applies to a existing dwelling intended to be rented. eg You buy a property and it needs some reno prior to leasing.

The interest and holding costs will add to the CGT costbase. It doesnt mean you delay claiming until the leasing commences.

Deductions for vacant land