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(IP loss) impact on Family Tax Benefit

Discussion in 'Accounting, Tax & Legal' started by lorrimer, 2nd May, 2008.

  1. lorrimer

    lorrimer Well-Known Member

    4th Jun, 2006
    Brisbane, Queensland
    I was wondering if one of the accountants out there would be kind enough to answer a question for me?
    I'm building an Investment Property ATM using funds from an IP loan. The house is a few months from completion so will not be ready to be rented out before the end of this tax year.
    I understand that the interest payments relating to this loan are tax deductable, but that when it comes to assessing Family Tax Benefit entitlement, any IP loss is normally added back on to assessable income.
    Please could someone clarify whether the interest payable on my IP loan will also need to be added back on to my assessable income for Family Tax benefit purposes, given that the rental property has yet to be completed, so is therefore not really a rental property yet,
    Thanks in advance,
  2. seaview

    seaview Well-Known Member

    8th Jun, 2006
    I am not an accountant, but have just finished paying off 2 years of Family Tax Benefit part B which I never even asked for, but then the mongrels demanded back after some losses on my tax return trickled through their filters.
    At least they let me pay it off @ $200 a month for 2 years, which I stoically look on as an interest free loan from the government.

    Basically, the interest on your new IP is only deductible this year if property is available for rent. This can be achieved by plonking a For Rent sign in front yard... it is up to you whether you actually accept a tenant. Of course if you do claim the deduction this year, then they surely will add back any loss onto your taxable income for Family Tax purposes, and you may end up in the same situation as me. So perhaps it is best to wait till next financial year and then tell them what they can do with the Family Tax Benefit.
    If you do not claim the interest deduction this year (because you have not rented it out), then that interest is deductible at some time in the future when you sell the property, from any capital gain you would make. :)

  3. DaveA

    DaveA Well-Known Member

    19th Feb, 2007
    Sydney, NSW
    Yes i believe its deductible... However by claiming it and it being added back on is the same as not claiming it at all....

    Best potential way to structure it is to get your employer to salary sacrifice your interest payments. As this reduces your assessabile income, it doesnt get added back on. So in future years your IP may be cash positive (except interest) which is exactly what you want for family benefit tax resons... but check this with your accountant (just make sure its not the same one your ex is using)