Helping Your Children Buy Property
Before helping an adult child buy property, consider how a gift, loan, guarantee or ownership arrangement could affect lending, tax and your wider financial position.
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From 1 July 2027, negative gearing for residential investment property is limited to new builds, apart from properties already held at 7.30pm on 12 May 2026. More doctors are now looking at house-and-land or knock-down-rebuild investments. The numbers can work, but the way the finance is set up in the first year or so can cost you real money.
Since 1 July 2019, you generally can't claim deductions for the costs of holding vacant land. That includes interest on money borrowed to buy the block, council rates and land tax.
Starting the build doesn't turn these deductions back on. For a residential investment, they stay off until the house can lawfully be occupied and is rented or genuinely available for rent.
The ATO's position is that interest on money borrowed to construct the house is not a cost of holding the land. So interest on your construction drawdowns can be deductible while the house is being built, subject to the ordinary rules about borrowing to earn income. That's a useful deduction at a time when there's no rent coming in.
Many lenders write a single facility to cover both the land and the progress payments. When that happens, the interest has to be apportioned between the land and the construction, drawdown by drawdown, until the house is finished and available for rent. It can be done, but it takes time, relies on complete loan statements, and is the kind of calculation that invites questions.
Two separate facilities, a land loan and a construction loan, give you a clean split with nothing to argue about. Arranging it at application costs little. Fixing it afterwards is harder.
Holding costs you can't deduct can generally be added to the property's cost base, which reduces the capital gain when you eventually sell.
The vacant land rules don't apply to some owners, including companies, or where the land is used in carrying on a business. Who owns the property can change the tax result before the finance does, so ownership is worth settling first. The new negative gearing rules have their own conditions too, so confirm that the property you're considering will qualify as a new build.
Talk to us before you sign the loan documents. At Verity we look at the structure and the finance together, so the loan is set up to match the tax treatment. Book a call. For more on how tax and lending interact, read Why Minimising Tax Can Quietly Kill Your Borrowing Capacity.
Before helping an adult child buy property, consider how a gift, loan, guarantee or ownership arrangement could affect lending, tax and your wider financial position.
Own a holiday home that you also rent out? From 1 July 2026, private use can have a greater impact on which property expenses are deductible.
Should surplus cash sit in your mortgage offset or be invested? The answer depends on tax, risk, liquidity, borrowing plans and what the money is ultimately for.