Help! Tax deductability of deposit


I'm due to exchange contracts on an IP this week and need to provide the usual 10% deposit, which I have in my savings account.

However, as the property is for investment I want to maximise tax effectiveness. I therefore intend to borrow the 10% but I won't have the borrowed funds ready in time for the exchange of contracts. I will have to use my savings for the deposit.

So my question is this: if I pay for my 10% deposit from my savings, and then get the borrowed funds later (in a week or two), will the ATO question the deductability of the borrowed funds? Will they see the correlation between what I have borrowed and what I have spent on the deposit? :confused:

And on this question, at what point is the deposit taken from your account?
Honestly I have been through this process many times but there are always details I forget! :rolleyes:

Would appreciate your advice! Thanks team!
Hi there,

To avoid using your own cash, maybe you could look into using a deposit bond (may take a few days to organise though). You could also negotiate a less than 10% deposit.....we exchanged on one IP with only a few thousand dollars that we could scrape together at the time (because our LOC hadn't been made available in time).
Alternatively, if they won't accept a less then 10% deposit, pay what you can upfront in cash ($500-$1000) just ot secure the place! With the rest paybale in 'x' days, 'x' being the numbers of days you think it will take to organise the loan + a few. The REA doesn't need to know where the funds are coming from...

Did this on the first IP via a credit card :)
The reason the last 2 posters have replied as they have is because the answer to your original question is, "No - you cannot use your own cash deposit and then use borrowed funds later." Which is why you'll need to use a more creative idea. Why don't you set up a short term loan from someone you know (paying interest) for the deposit & then pay them back when the loan comes through? That way you are replacing borrowed money so all good.

I'm not in NSW so unfamiliar with the concept of 'exchange.' But what happens in Vic is as soon as you habd over the cheque the REA will bank it next day.