claiming LMI on refinance of PPOR to buy IP

[bigdave764]

We had a loan on our PPOR which was less than 80%. We extended this loan to 90% with the specific purpose of funding the deposit for our IP and so incurred around $18,600 of LMI costs (and as both mortgages are with Bankwest, the LMI was incurred on the very same day as the settlement of our IP purchase). There is no LMI on the IP as the mortgage is exactly 80%.

Can I claim 1/5 of the LMI of PPOR in my tax return as being attributable to the cost of financing the IP?

Cheers,

Dave

p.s. I've searched on here and not found an crisp answer to this question because most of the other questions had different circumstances or issues around timing.

 

[bigdave764]

And a second question is whether I just claim exactly 1/5 of the LMI, or if I have to adjust for the number of days we owned the IP (e.g. we owned it for about 3/4 of the tax year - so do I need to reduce for this)?

 

[Terry_w]

I would think that is claimable in a portion but not the whole amount because most of the loan is for a private expense.

 

[bigdave764]

So can I just claim the fraction of LMI that relates to the increase in the loan?

 

[Terry_w]

Depends

A).
Increase existing loan
really $400,000 of the loan relates to the PPOR
$50,000 relates to the Investment

400/450
50/450 would be deductible

B)
Take out a separate loan of $50,000 with LMI charged to this loan
All the LMI may be deductible if this $50,000 is used for investment purposes

C)
Refinancing from lender A to lender B with either of the above - increasing the existing loan or creating a new split.

In this case I think only 50/450 would be deductible.

==
Depends

A).
Increase existing loan
really $400,000 of the loan relates to the PPOR
$50,000 relates to the Investment

400/450
50/450 would be deductible

B)
Take out a separate loan of $50,000 with LMI charged to this loan
All the LMI may be deductible if this $50,000 is used for investment purposes

C)
Refinancing from lender A to lender B with either of the above - increasing the existing loan or creating a new split.

In this case I think only 50/450 would be deductible.

 

[bigdave764]

Thanks Terry - I think it's option A. We increased our PPOR loan specifically to have money to push into the IP. Appreciate you taking the time

And to confirm that we claim the relevant portion apportioned in equal amounts over 5 years?