Claim LMI on Tax?

[nowork]

Hi Guys,

I was just wondering two things,

Can you claim LMI for a new build for investment purposes?

Can you also claim LMI if you are accessing equity from your current property (eg, LVR going from 30% to 10% to gain enough funds) to use as deposit for a new investment property?


Thanks,

 

[D.T.]

Yep , split over 5 yrs

 

[nowork]

Yep , split over 5 yrs

Cool, thanks.

 

[coastymike]

Technically it is claimed over 60 months not 5 years so apportionment in first and final year

 

[Terry_w]

And if the loan is paid out before 60 months....

Accessing equity in an existing property - 2 schools of thought
1. Must be apportioned because the LMI is on the total loan amount and most of this relates to the non deductible portion of the loan
2. Loan increase is solely for the new IP so LMI fully deductible under the normal rules.

 

[Paul@PFI]

Technically it is claimed over 60 months not 5 years so apportionment in first and final year

The property is to be newly constructed. Some of the deduction may relate the the construction period. While Steele's decision does allow a interest deduction at the time the property becomes available for rent the same doesn't apply to borrowing and other ownership costs.

Whats your view for that period ? Borrowing costs are capital expenditure prior to the IP being available for rent ?

On Terry's two thoughts that can be a issue and each must be judged on merits. If an application to the bank indicates the sole purpose of refinance, reval etc and new proceeds is to buy an IP then the LMI is 100% deductible. I have seen others who proceed down the path with equity release capable of buying two further IPs. My view is the 60 months starts and pro-rata between deductible Ip1 and non-deductible then when IP is bought two deductibles. Would you think this approach reasonable ?? I dont see it as 100% deductible if there is no actual borrowing.