Our Experts Answer:
You are correct. My understanding is that interest deductibility relates to the original loan purpose. In your query, if the original loan was obtained for the purpose of purchasing the said property then interest of that loan(s) would be deductible only. In regard to your query on the timing of your property being "available to rent out" you need to make sure that you have evidence of availability for the IRD. A good example would be keeping copies of "To Let" advertisements or property management contracts entered into. If the property was never rented out you would indeed find it very difficult to claim deductibility! Should you be requiring future borrowing for a personal home purchase then selling your rental property to a LAQC may be a good option to investigate and restructuring your total debt. For more information please feel free to call me on 03 371-4731 or check out the IRDs website on www.ird.govt.nz or their really informative booklet IR264.
Roger Swift has been in the finance industry for over 20 years both domestically and internationally. Banking experience includes Corporate and Business banking portfolio management, Structured Finance, International Trade Finance, and retail banking (primarily in the home loan market). Personally he has been involved in residential property investment for over 16 years and well versed in asset and tax structuring both from a professional and personal point of view. Call him sometime.
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