All Topics / Legal & Accounting / Advice to claim interest in tax

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  • Profile photo of nmlhejanmlheja
    Member
    @nmlheja
    Join Date: 2005
    Post Count: 19
    October 21, 2005 - 5:13 pm

    Hi, Everyone,
    One of my friend had a mortgage left of $40000 on his house of $220000. This property is his residence. He wants to buy a block of land to build a house to live in. The cost of the land is $150000. He has been advised his finance brocker, that he should refinance his property for 200000, having a investment loan against the house. With this 200000 he should pay 160000for land and pay 40000 for his original mortgage. After the loan is drawn he should move out of the house and put the house for rent. As the loan is for investment purpose and the house is on rent. He can claim all the interest that he will pay for the 200000 loan in his tax return.
    Is it possible or is there any trap? Please advice.

    Profile photo of ToolsTools
    Participant
    @tools
    Join Date: 2003
    Post Count: 363
    October 21, 2005 - 8:47 pm

    The ATO will look at what the funds were used for and see they were of a private nature,and disallow the claim.You can only claim the interest if the funds are used for income producing purposes,and in this case you are saying the funds are to buy land for PPOR.I would be looking for a new finance broker.

    Tools

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    October 21, 2005 - 10:23 pm

    Tools is right.

    Unless of course he is going to build an IP on the land in the near future.

    A broker shouldn’t be advising people to make decisions on whether to move out of their PPOR and rent it etc. Is he a licensed financial advisor? I bet not.

    Change brokers immediately.

    One idea might be for your friend to borrow against his home to buy the land. Ensure the new borrowings are identified seperate from the old via a split or LOC.

    If he is building an IP the interest is deductible.

    If he is holding and selling for profit then the interest may be used to offset his CGT on sale.

    This is just something for discussion not fully considered advice.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    ***NODOC @ 7.15% to 70% LVR***
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of nmlhejanmlheja
    Member
    @nmlheja
    Join Date: 2005
    Post Count: 19
    October 23, 2005 - 12:15 am

    Thanks
    Tools and Mortgage Hunter for your expert opinion.

    [cap]

Viewing 4 posts - 1 through 4 (of 4 total)

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