Hi guys, I have a tax deduction question that I’ve not seen asked before.
Last financial year, my mother-in-law took out a LOC against her fully paid off IP. We borrowed from her LOC $70,000 to use as a deposit for purchasing an IP. Is the interest charged to her on this $70000 tax deductible for us? I assume it is seeing we are borrowing this money to buy an IP. However, the LOC is obviously in her name, so I’m unsure. My accountant says it’s okay because of the purpose of the loan but I would like a second opinion.
Does anyone have a simple answer?
Listen to your accountant, he has the full picture and understands your position. But having said that the answer is clearly yes if you consider the purpose of the LOC.
Modernity Investing
Email MeThanks for answering Mark. I had some bad advice from a previous accountant so I am a bit wary this time. I didn’t want to claim for something that I wasn’t entitled to so I wanted to double check.
Hi Kenny
When you say “us” do you mean yourself and mum or just you mum?
If she’s the only one on the title for the IP that the LOC was taken out against – I’d assume she’s the only one that can claim it as a deduction.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Sorry but I think I made the question confusing and misleading. My mother-in-law took out a LOC; my partner and I bought an IP using $70000 borrowed from that LOC. My mother-in-law has nothing to do with the IP my partner and I purchased. Does that make sense? She lent us that $70000 taken from her LOC. Only my partner’s and my name are on the title of the IP.
Kenny
Anyone else with an answer?
Yes the interest would be Tax deductible at the rate your Mother in law is charging you.
I assume that this is the same rate as she is paying on her loan.
Fairly standard way of structuring.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for your answer Richard. I’m still learning about the intracacies of property investing and learning a lot on these forums. Cheers!
Hi Kenny
Do you have a loan agreement in place with your num?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Do you mean a written loan agreement? If you do then no, we don’t, only verbal. Does it have to be written?
Cheers,
Kenny
You must be logged in to reply to this topic. If you don't have an account, you can register here.
