Interest deductions during construction of a property

Are you?
– A taxpayer building a property to derive income?

At a glance:
– The Tax Office may accept that expenses incurred while a property is under construction are tax deductible if the taxpayer’s intention and purpose when building the property is to derive assessable income.

You should:
– Check whether the interest incurred during the construction of a property is deductible.
– Contact us if you require any clarification or advice.

Under Taxation Ruling 2004/4, the Tax Office accepts that interest incurred during a period prior to the derivation of assessable income will be ‘incurred in gaining or producing the assessable income’ in the following circumstances:

The interest is not preliminary to the income-earning activities;

• The interest is not private or domestic;
• The period of outgoings before the derivation of assessable income is not so long that the necessary connection between the outgoings and assessable income is lost;
• The interest is incurred with one end in view i.e. the gaining or producing of assessable income; and
• Continuing efforts are undertaken in pursuit of that end.

For more information, click here.

Remember:
– The income connection to the interest incurred over a long period may be lost.