an example of a property acquired for capital gain only........A purchased a block of land for 35000, no intention of building on it, sole purpose was to hold it for future capital gains. in the 5 years A held the property, there was no assessable income, nor could A claim any deductions, ie rates, interest, land tax etc.......... A sold the property for 70000 5 years later. A was able to claim the capital costs associated with the asset, ie purchase price 35,000, legal costs in acquiring the asset, all annual costs for rates, interest etc, and selling costs. Say total annual costs were 2500....per year x 5 =12500, plus legals 2500 = total capital cost = 50,000 capital gain = 20,000 divided by 2 = assessable capital gain =10,000
*** AND, if you acquire property for a profit making undertaking or scheme...........you are required to notify the commisioner in the year the property was acquired. sect 25-40.....this requirement alerts the commissioner that the property is the subject of a capital gain or loss scheme, not a revenue scheme.
**** the majority of investors, are allowed to deduct expenses attributed to ordinary assessable income , ie; rental income, therefore allows the claims for interest expense...........****.to say that most property investors are only in it for the capital gains, and accordingly should not be allowed to claim a deduction for interest expense is wrong.............the tax laws specifically allows the deduction . because the income received is classed as ordinary assessable income.........
compared to the specific exclusion from claiming the deduction on an annual basis when a capial gain is included in assessable income............
Interesting that posters can hold the view that running an investment property portfolio should have more onerous restrictions regarding deductions against the income, compared to any other business ! Most businesses borrow money to be able to run their business, and are allowed to claim the interest expense. Property investors provide your rental property, without property investors there would be a massive shortage of houses.
