Break fees tax-deductible

Hi there,

Are break fees to break a fixed rate loan tax-deductible? (immediately or over 5years?)

Thanks.
 
Remember that huge post you started on 5 year fixed rates? there was a whole load of discussion on that thread about tax deductable break fees. Im not an accountant, but I'm pretty sure they are if the loan is for income producing purposes. Im not sure if they are immediate or over a couple of years like depreciation though.
 
Deductable in the year they are incurred. The other loan fees associated with the re-fi etc. may be ammortised over 5 years, but these will be the chickenfeed fees. The break cost is the big one.
I think I posted a PDF tax ruling on that inthe aforementioned thread.
 
spot on Rob. there is no future benefit from the loan so write em off. read it and weep ATO... if they want a slice of this great tax bonanaza they can share the pain as well
 
Deductable in the year they are incurred. The other loan fees associated with the re-fi etc. may be ammortised over 5 years, but these will be the chickenfeed fees. The break cost is the big one.
I think I posted a PDF tax ruling on that inthe aforementioned thread.

Rob,

Thanks, and presumably the interest cost on money borrowed to pay these fees is also tax-deductible?

Breaking may in fact turn out to be a CF+ve exercise?!

eg. 5k break fees
use 5k borrowed funds from a LOC to pay this at 6.5% pa, $325 pa cost (say you pay this with cash)
tax deductions: 5k break fee, $325pa interest cost
... ?

Is this right? - reminds me of CF+ve business cars!
 
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Effectively, the break costs get sucked up in the re-fi process at settlement. So your paying interest ont he new loan, which is for the purpose of investment, so that's all good.
I broke all of my fixed to 1) improve serviceability and 2) release huge chunks of equity for the next phase in my investment cycle.
It cost me around $20k overall, but the valuations I got ont he properties far exceeded my most ambitious expectations, so I ended up miles in front of my budget even after the break costs.
The bond market had taken a bit of a hit recently, which has impacted the reinvestment rate they use to calculate the break costs. That hurts a little.
I settled one on the 27th May. The break cost increased $1,000 since the estimate they gave me 10 days prior to that. Unlucky timing, but a small price to pay for $60k equity release.
 
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