Claiming Interest Query

[dodo_lurker]

Hi,

I have an IP in my name which I have obtained an additional seperate loan against in order to fund the deposit for IP2, which has been bought through my Family Trust.

Where do I claim the interest for this deposit - in my own tax return (as the loan is in my name) or in the Trust tax return (as that's the Property the deposit was used to buy).

Thanks!

 

[D.T.]

As I understand it, you have something like this:

IP1
Loan A $X
Loan B $Y (used for deposit and costs on IP2)

IP2
Loan C $Z

In this case Loan $X is deductible against IP1 and $Y + $Z is deductible against IP2. And then, name on the title benefits from deductions, NOT the name on the loan.

 

[dodo_lurker]

Great, thanks - that was my point of confusion!

 

[Rob G.]

You borrowed the money.

The discretionary trust purchased a property.

Did you make a commercial loan to the trust at interest ?

 

[Neptune]

Yep I have an IP solely in my name but mortgage is in both my and my partner's name....I get to claim 100% of the deductions.

 

[alexlee]

Yep I have an IP solely in my name but mortgage is in both my and my partner's name....I get to claim 100% of the deductions.

Neptune, you can claim 100% of the deductions because the IP is in your name.

Where the IP is in the name of the trustee / trust, dodo CANNOT claim the interest deduction. If it's a loan to the trust, he might be able to claim interest but only if the trust pays him a commercial rate of interest.

 

[coastymike]

Agreed. No commercial loan agreement with the trust then interest non deductible.

 

[Terry_w]

Neither you nor the trust could claim the interest.

Even if you have a commercial loan agreement your income would cancel out any deductions and you would end up with a profit to declare.