Hi all, My wife & I built a house as an investment in 2007. We lived in it for about the first 12 months, essentially to fit it out & complete the building process before moving back to our original & present house. The house was rented for the subsequent 2 1/2 years since moving out. I was never intending to call the investment property our principle residence. We sold the investment property in February 2011 & my query is, can we capitalise the interest for CGT purposes (i.e. increase the cost base) for the period we lived in it? Thanks
Yes. Ownership costs, which include interest, rates, maintanence, insurance etc. while you were living in it (and therefore not claiming a tax deduction) form part of the cost base to reduce your gain.
It may even be possible to avoid CGT totally by applying the absence from main residence rules, (s 1118-145 ITAA 1997) while you were renting it out.