Hi all. Hope you don’t mind helping me on a small point.
Just wondered, if a property ($250,000 value) is negatively geared with a loan on it GREATER than its value (ie. borrowed $300,000… which includes the ‘remnants’ of a loan on our PPOR), how much of this $300,000 interest can we claim?
Thanks to any who respond.
It’s the purpose of the loan which determines whether or not the interest is deductible. In your case it sounds like you need to apportion which funds are related to investment and which to PPOR. Probably you can claim the $250K plus purchase costs related to the IP.
Rod.
to my understanding, if you can show the ATO that the market value of the property is $300k inclusive with all costs, then the interest is deductible.
but if the market value + Stamp duty and other capital acquistion costs is only $250,000 then the other $50,000 interest is not deductible. This is because it is not used to generate an income because the acquisition costs is only $250k
I think you should always try to avoid “contaminating” any loan with private purchases. It’s much better to have separate loans (or sub-accounts if you have a portfolio/”line of credit” loan). You may incur a bit more in fees, but with that amount of money borrowed, some banks (at least mine does) will waive any such fees associated with creating multiple loans. There’s no hassle with the ATO then.
JI agree with doogs, it’s best to keep it all seperate and traceable.
div43, I wouldn’t contemplate trying to claim more than was actually spent on the IP. You need to be able to show what the funds were used for.
Rod.
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