Hi - I am a permanent resident in Australia and I live and work in Melbourne. I pay around $2,000 every months towards a land purchase mortgage. Please advise if that is a tax deductible expense?

Hi Sahar,

It depends on what the purpose of the land purchase is. If is is for you to build a house and and live in it as your own property, which I suspect it is, then no, payments are not tax deductible.

If you intend to use it for investment purposes, I'm not an Accountant so I'm not qualified to give this advice but I doubt that you could claim it as a deduction until there was a house built on the property. You should speak to your Accountant to confirm this.

Cheers,

Michael Budge
Director
Bayside Finance Group

Hi Sahar,

It depends on what the purpose of the land purchase is. If is is for you to build a house and and live in it as your own property, which I suspect it is, then no, payments are not tax deductible.

If you intend to use it for investment purposes, I'm not an Accountant so I'm not qualified to give this advice but I doubt that you could claim it as a deduction until there was a house built on the property. You should speak to your Accountant to confirm this.

Cheers,

Michael Budge
Director
Bayside Finance Group

Hi Sahar,

holding costs for investments are generally deductible:
eg rates, insurance, body corporate, pest control, INTEREST on mortgages.

so in your case it would appear that you have a mortgage on a piece of land, no building on it and no rental income. Many people would presume that since you dont have any income you cannot claim any expenses. This is not true. The asset is clearly going to be subject to CGT when you sell it, and holding costs for any investment asset are deductible.

sooooo, the INTEREST portion of your mortgage payments will be deductible. If the mortgage is interest-only then bobs your uncle!!! If it is P&I then only the interest portion will be deductible. You should be able to see what the interest portion is on your statements, otherwise your bank will be able to inform you.

Just remember that any disposal of the land will trigger Capital Gains Tax, and you will need to know what the cost base is: which includes, the purchase price, legals, stamp duty, and lots of other things, so KEEP YOUR RECORDS!!!!

good luck
bc