If hubby lends me $’s to invest from his available line of credit, can I claim the interest as tax deductible if the loan agreement was drawn up and I purchased a property in my name? I am assuming that he would have to declare any interest payments as income but then can he claim the interest too? The loan would be paid back at his current interest rate (by me), so there’s no profit or loss on his side.
I currently have a portion of my own line of credit to use but am not currently working, so arranging subsequent finance becomes a big issue. Existing properties are cashflow positive but lenders cannot see me as being able to service the loan.
Is this legal and possible? Has anyone else done it? Would there be any issues with the tax department?
Appreciate your advice and input.
Hi Abundantone
Simple answer is Yes and there is no difference to taking out a Private loan or a loan from an established lending institution.
A formal loan agreement would be drawn up setting out the Terms & Conditions of the advance and your would claim the interest paid as a deductible expense.
In turn your hubby would declare this as income.
Of course if the rate he charged you was the same as he was receiving then his Tax position would be neutral.
For the purposes of the response i am assuming the funds would be used for investment.
Cheers
Yours in Finance
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This reply was modified 10 years, 4 months ago by
Richard Taylor.
Richard Taylor | Australia's leading private lender
As Richard said – shouldn’t be an issue given the purpose.
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]
Thanks Richard and Jamie. Much appreciated. As it’s a LOC, legally he would be allowed to on-lend it, wouldn’t he? Don’t want to break any rules. :-) My understanding is that he can do what he likes with it. The only risk is if the bank called in the loan (LOC in this instance), but I imagine this would be an unlikely event. And yes, the purpose would be for investment (property).
There is no reason to think they would call in the loan if the account conduct was satisfactory and the property values were maintained.
Nothing to stop him using the funds for any purpose at all.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I draw up these sorts of loan agreements all the time. Would it be commercial for your husband to lend you unsecured at the same rate that he is paying? probably not, so I advise clients the lender should take security and make a small profit.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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This reply was modified 10 years, 4 months ago by
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