Interest Prepayment Question Again -Dale

From: Laurie Shaw


Dale

Do you mind please confirming advice I received from my accountant?

I originally mooted the issue of prepaying interest a little while back as you may recall.

Further to this, if the bank advances me the funds for this purpose on top of the original loan amount
(comprised of purchase price +costs),is this amount also deductible or does the ATO view borrowing interest dimly?


To illustrate the example:

Purchase price: $410k
Borrowings: $450k
- comprised of $15k costs
+ $25k to cover the first
years interest

Loan is IO for 1 year - with discount for prepayment

Very much appreciate your response and indeed your responses to all posts have been informative and helpful


Regards

Laurie
 
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Reply: 1
From: Duncan M


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Dont forget the big tax bill in the following year.

Duncan.

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Dont forget the big tax bill in the following year.


Duncan.




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Reply: 1.1
From: Dale Gatherum-Goss


Hi Laurie

Thank you for your kind words. I do appreciate them.

If you borrow the extra money to use specifically to pay interest, then the tax office have shown a distinct dislike to this extra interest as a tax deduction.

However, if you borrow the money in general sense to use for your IP's then I have no qualms in you claiming the interest as a tax deduction even if this means that we're effectively claiming interest on interest.

Again, and as I have mentioned previously, if the extra loan amount means that your interest rate is discounted a little bit more, then, we have a powerful argument in justifying our claim.

As Duncan mentioned, a big claim this year of interest in advance may leave you short of tax deductions next year. Be careful and plan well.

Have fun

Dale
 
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Reply: 1.1.1
From: Laurie Shaw


Dale

Thank you for your reply - succinct and helpful. I'm sure everyone appreciates that as I do.

Laurie
 
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