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Claiming construction costs on Brand New Investment Property

Newbie

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Replies 2

Hi all,

I am nearing completion on a brand new dwelling which is purely for an investment property. Construction commenced July 2020. If it is not completed by 30 June am I still able to claim the costs of construction, planning, interest on loan this year? I read conflicting information re this.

If I can claim this year, how does this go into the tax return as it asks for date genuinely available for rent?

If I cannot, do I claim it all against my next tax return when it is producing rent in the next financial year 2021/22, or is it effectively 'lost' if not claimed in the same year the costs are incurred?

Thank you in advance.

1 ACCEPTED SOLUTION

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Most helpful response

ATO Certified Response

ATO Community Support

Replies 0

Hello @Annon,

 

There are two types of rental property deductions that relate to your question:

  • expenses you can claim an immediate deduction in the income year you incur the expense, and
  • expenses can claim deductions over a number of income years. 

You are able to claim an immeadited deduction for these expenses on a property that is being constructed prior to it being avaliable for rent :

  • interest on loans, 
  • local council, water and sewerage rates 
  • land taxes 
  • emergency services levies 

For more information please see page 9 of our rental properties guide.

 

Construction expendature is considered a capital works deduction.  You can only start to claim a capital works deduction once construction is complete. You won't loose you dedution for the previous finacial year becuase unlike immeadite deductions, capital works dedcuations are spread out over a number of income years.  For property capital works deductions are claimed over a period of 25 or 40 years. 

 

Please see page 28 of our rental prpoerties guide for more information about what construction expendature is claimable and how to claim your capital works deduction. 

2 REPLIES 2

Devotee

Replies 0

I think the claim is denied under the "vacant land" rules until a certificate of occupancy is granted (would need to look that up), so assuming you have COO and the property is genuinely available for rent, expenses incurred from COO to EOY will be claimable. If no COO, then no deductions are available.

Most helpful response

ATO Certified Response

ATO Community Support

Replies 0

Hello @Annon,

 

There are two types of rental property deductions that relate to your question:

  • expenses you can claim an immediate deduction in the income year you incur the expense, and
  • expenses can claim deductions over a number of income years. 

You are able to claim an immeadited deduction for these expenses on a property that is being constructed prior to it being avaliable for rent :

  • interest on loans, 
  • local council, water and sewerage rates 
  • land taxes 
  • emergency services levies 

For more information please see page 9 of our rental properties guide.

 

Construction expendature is considered a capital works deduction.  You can only start to claim a capital works deduction once construction is complete. You won't loose you dedution for the previous finacial year becuase unlike immeadite deductions, capital works dedcuations are spread out over a number of income years.  For property capital works deductions are claimed over a period of 25 or 40 years. 

 

Please see page 28 of our rental prpoerties guide for more information about what construction expendature is claimable and how to claim your capital works deduction.