Detailed Definitions of Purchase and Loan Costs

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From: Anonymous


I used PIA to help with the purchase of my last IP and I was just updating PIA with the actual, final figures. I am a little confused with a couple of items as to whether they fall into the Conveyancing Cost Category(of Purchase Costs....and hence not immediately deductible) or if they are Loan Costs(and therefore deductible over 5 years). ie. things like my wife went guarantor on the loan(to keep it in my name)and the lending authority insisted as part of the loan approval that she received INDEPENDENT legal and financial advice(for which we had to pay for). Is this type of thing considered to be a Loan Cost? While in PIA there is a great list of example Loan Cost Components, the category of 'Conveyancing' in Purchase Costs seems a little general. Is there a definitive description somewhere(ATO Web??) that I can get some of these items clarified?
 
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From: Webmaster (Somersoft)


There is no definitive list to my knowledge but you are welcome to check with the ATO and your own accountant. Where there is some doubt as to whether an item is classified as a loan cost or a purchasing cost, there is certainly a tax advantage in having it fall into the former, but the onus is on the taxpayer to be able to substantiate the claim to the ATO. A good example is the cost of searches carried out by your solicitor - if a condition of the finance approval was that you had to have the searches carried out, they could be considered a loan cost, if not, they simply form part of the total conveyancing cost and hence would be considered a purchase cost.
 
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From: Anonymous


Thank you. That's interesting. As the loan for my IP required a second mortgage on my home, and a condition of the loan approval was that I must have building insurance to a certain value on my home....I thought(was hoping!) that the building insurance on my home should then be tax deductible. ie. it was a condition of my IP loan. I asked my accountant and he said it wasn't. I wonder if he is right? Any thoughts?
 
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From: Paul Zagoridis


This is a good question for the Property investor forum.

I suggest you take it there. But I would be arguing with my accountant that some % of the insurance premium is deductible if you did not have that level of coverage before.

Regards

Paul
 
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