Claiming expenses on investment property

Question from Aaron updated on 19th February 2007:

If you purchase a property with the intention of renting it out, but in the meantime you live in it while you are doing it up, can you claim on the loan interest while living in it as an expense? If so, is there any maximum time limit for doing so? I realise depreciation cannot be claimed until it is available to let out. Many thanks.

Our expert responded:

Until the property is available to be rented, it is not able to derive any gross income and therefore, any expenses relating to that property will not be deductible. Any repairs and maintenance or improvements made to the property will be capitalised and depreciated when the proeprty is available to rent. Another point to be aware of is that while you are living in the property, the use of the property is of a private and domestic nature, and any expenses incurred during this time are also not deductible. A better solution to this situation would be to leave the property as is for at least a year and rent it out to a tenant. Once that tenant leaves (of their own free will or as per the terms of the tenance agreement), then do the work required at that time. The property should be advertised for rent (and you shouldn't live in it during this time) and then the costs incurred will be tax deductible as the proeprty is available to be rented. Most tenants will have to give three weeks notice to their old landlord anyway.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.


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