Hi,
How can i claim LMI, Stamp Duty and other Legal Expenses:
a. If property is sold after say 2 yrs
b. If property is sold in say less than a year
c. If property is sold after 5 yrsHow much do i claim in the first year and how much in subsequent years.
Thanks,
Nick.Hi,
In each of the three scenarios listed – the number of years before sale – the legal costs are claimed at the time of sale. They reduce the capital gain on which taxed is paid. They are capital costs and are taken into account to reduce the capital gain made on sale.
If by LMI you refer to loan mortgage interest, that is claimable each year. Interest deductions are on revenue account, so are claimed each year against the rental or other income from the property.
Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nzThanks for your help Christopher,
LMI is Loan Mortgage Insurance
i am paying $7800 at the time of purchase as i am borrowing more than 80%
will this be considered as capital expense as well ?Thanks,
Nick.Hi Nick,
Loan Mortgage Insurance in excess of $100 is claimable over the term of the loan or 5 years, whichever is shorter. This is pursuant to ATO ID 2002/1116.
This means that the $7 800 is claimed over five years. Where the property is sold before 5 years has expired, the balance of the unclaimed insurance is claimed at that time.
LMI is considered as a borrowing cost. It is regarded as on capital account. As it is related to the loan, it is written off over the time of the loan. There is an ATO interpretive determination (ATO ID 2002/1116) that governs the claiming of the expenditure, and allows the expenditure to be claimed over the term of the loan or five years, whichever is less.
Therefore, it is in a class of expenditure governed by special rules – ATO ID 2002/1116 in this case.
Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nz
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