Borrowing Costs

[WilliamB]

Hi all,

I have just sold an investment property I bought about 18 months ago. We did very well out of it and wanted to use the funds for another project we are progressing with.

We have claimed about 1/5 or so of borrowing costs (Mostly LMI) in the rental schedules so far for FY13 tax return, as permissible.

Now we are selling the property, must we include the 4/5 balance of borrowing costs in the Cost Base, or can we claim it as part of the rental schedule?

I think I know the answer already (Cost Base), but the reason I ask is because if we claim it as part of the rental schedule, we don't lose half of the benefit with the 50% discount rule.

Thanks in advance

 

[Terry_w]

Hi all,

I have just sold an investment property I bought about 18 months ago. We did very well out of it and wanted to use the funds for another project we are progressing with.

We have claimed about 1/5 or so of borrowing costs (Mostly LMI) in the rental schedules so far for FY13 tax return, as permissible.

Now we are selling the property, must we include the 4/5 balance of borrowing costs in the Cost Base, or can we claim it as part of the rental schedule?

I think I know the answer already (Cost Base), but the reason I ask is because if we claim it as part of the rental schedule, we don't lose half of the benefit with the 50% discount rule.

Thanks in advance

It would be claimable against income - 5 years or term of the loan if shorter.

 

[WilliamB]

Thanks Terry, that is fantastic news.

Most appreciated.

Cheers mate.

 

[devank]

Are these considered as borrowing costs?
- stamp duty
- lender's mortgage insurance
- Solicitor costs
- loan establishment fees
- title search fees (charged by lender)
- mortgage broker fees
- valuation costs


Did I miss anything else?

 

[Aaron_C]

Stamp duty wouldn't be a borrowing cost nor solicitor fees I would've thought.

 

[WilliamB]

Hi Devank

From the ATO website "The types of borrowing expenses you can claim as income tax deductions for taking out a loan to purchase a rental property"

http://www.ato.gov.au/Individuals/I...expenses/?default=&page=2#What_can_you_claim?

Pretty good page actually.

Looks like I have a few little bits and pieces I can adjust previous returns for! The LMI was the big one though.

Cheers,

 

[WilliamB]

I can't see anything in there about mortgage discharge fees either. Assume that would be similar fee would it not? Technically its a borrowing costs.

 

[devank]

http://www.ato.gov.au/Individuals/I...expenses/?default=&page=2#What_can_you_claim?

Cool... that has stamp duty & solicitors' fees!

Now... what if you didn't claim for last two years? Can you claim all three years portion in one go?

 

[twinkle_star]

I think that refers to stamp duty on the mortgage, not stamp duty as in land transfer duty.

 

[Aaron_C]

But there is no stamp duty on mortgages in NSW for residential mortgages.

 

[Terry_w]

But there is no stamp duty on mortgages in NSW for residential mortgages.

There is if the purchaser is a company (isn't there still?)

 

[Terry_w]

Are these considered as borrowing costs?
- stamp duty
- lender's mortgage insurance
- Solicitor costs
- loan establishment fees
- title search fees (charged by lender)
- mortgage broker fees
- valuation costs


Did I miss anything else?

Just to clarify.

Solicitor costs for prep of loan docs maybe a borrowing expense, but not costs relating to the conveyancing.

stamp duty on the loan but not the transfer would be deductible.

 

[Aaron_C]

There is if the purchaser is a company (isn't there still?)

Looks like it: http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s221c.html in section 3.

 

[devank]

Just to clarify.

Solicitor costs for prep of loan docs maybe a borrowing expense, but not costs relating to the conveyancing.

stamp duty on the loan but not the transfer would be deductible.

Thanks... That makes sense.

Here is the list from that ATO site.

What can you claim?
You can claim all of the following:

• stamp duty charged on the mortgage
• loan establishment fees
• title search fees charged by your lender
• costs (including solicitors' fees) for preparing and filing mortgage documents
• mortgage broker fees
• fees for a valuation required for loan approval
• lender's mortgage insurance, which is insurance taken out by the lender and billed to you.