Can I negatively gear after buying investment property outright?

(I'm new)I'm new

28 Apr 2025

Hello! First time poster here so please forgive if these issues are well covered elsewhere.

I’m about to settle my late father’s estate and am expecting around $500K to land in my account soon. I’m thinking about buying a small investment property (around $450K).

My Qs:

1. Is it possible to buy the apartment outright and then later (maybe in 12 months) release equity to take on a mortgage and negatively gear the interest payments in subsequent fys?

2. If I did buy the apartment outright and renovate am I able to claim the costs of renovating as tax deductions if they exceed rental income? Do the renovation costs need to be in the same fy as income is received? Or coukd the renovations be booked this fy with rental income commencing next fy?

In short: I am looking at options to negatively gear a small investment property without applying for a new mortgage and to make the most tax-9sensible use of the $$$ from my father’s estate in the process.

Thanks in advance for any advice or tips.

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Taxduck

(Taxicorn)Taxicorn

28 Apr 2025

Interest expenses can be claimed on a loan to purchase a rental property. If you buy a rental property without a loan, then any future loan will be for another purpose because you have already purchased the property. You are not able to claim the interest on this loan on a rental property you already own except in the following circumstances

buy a depreciating asset for the rental property – for example, an air conditioner for the rental property
pay for deductible expenses – for example, to make repairs to the property that arise as a result of you renting it out
finance renovations and extensions to the rental property.

Interest expenses | Australian Taxation Office

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Tax_Quacker

(Dynamo)Dynamo

28 Apr 2025

Yes, this is an option.
You can claim deductions for renovations during a period which the property is being rented or advertised for renting. If it is vacant, the expenses will be added as part of the cost base of the property which will reduce capital gains tax if the property is eventually sold.

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Gurgle

(I'm new)I'm new

28 Apr 2025

@aus_anon tks sm for this

to claim full renovation costs would the IP need to be available for rent for the whole fy? If so, how is the period of renovation managed as it wouldn’t then be avail for rent?

thanks sm for any further advice 🙏🏻

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Tax_Quacker

(Dynamo)Dynamo

29 Apr 2025

@Gurgle If not rented for a full year, you can apportion the renovation costs between an immediate deduction and a holding cost based on period available for rent.

Example: If the property was rented half a year and the renovation costs $500, you're entitled to a $250 deduction and the balance $250 can be added as a holding cost to reduce capital gains if eventually sold.

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Most helpful reply

Taxduck

(Taxicorn)Taxicorn

28 Apr 2025

buy a depreciating asset for the rental property – for example, an air conditioner for the rental property
pay for deductible expenses – for example, to make repairs to the property that arise as a result of you renting it out
finance renovations and extensions to the rental property.

Interest expenses | Australian Taxation Office

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Gurgle

(I'm new)I'm new

28 Apr 2025

@Taxduck thanks for advice and link - v helpful

what if the future loan was for another investment property? Would that mean interest payments for both IPs would then be tax deductible?

thanks for advice 🙏🏻

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Taxduck

(Taxicorn)Taxicorn