I am with Ubank and still paying off my primary residence home loan. We recently deposited 5% to secure land for investment property and is due to be titled in about 4 months of time. We are thinking to wait for a year or two before building the house.
Given that we have enough money to redraw from this loan to purchase this land, we are thinking to do this rather than applying for another new loan.
But I am not sure whether there are any disadvantages in doing this. Any one know this? Thanks
land for investment
Possible tax implications but IANAA
Land is not an incoming generating asset - so no expenses (like loan interest) related to the land purchase would be tax deductible anyway.
Its only after the houses are built and the property is put on rent; that associated expenses would become eligible for tax deductions.
However; best to talk to an accountant to see how to structure the loans in order to maximum any deductions when they become eligible.
My accountant (about 5-6 years ago - so this may have changed) advised me that the costs of the loan were deductible even before the property was available for rent as long as the intent was always for it to be an investment/rental.
I would say you got incorrect advise.
https://www.ato.gov.au/General/Property/Land---vacant-land-a…
States that for land costs to be deductible, it make be used to generate income. Nothing at all about intent or ability to generate income in the future.
Just had a look (one tab below the link) https://www.ato.gov.au/General/Property/Land---vacant-land-a…, it appears it changed as of July 2019. So it was correct at the time, no longer. Still appears as if it's beneficial to keep separate as an investment loan as you can use the interest to reduce capital gains if the asset is ever sold.
Get advice from an accountant.
Pull the money from redraw and make sure you split the loan so you can tell what split is for investment purposes going forward.
https://www.propertychat.com.au/community/threads/strategy-b…