Is it ok to pay my tax bill with LOC?

[dex]

I just received my tax bill
Are there any problems with the deductibility of interest on my LOC if I use some of it to pay my tax bill?

 

[Scott No Mates]

AFAIK paying tax is a personal expense not related to the activity of owning a property. Go directly to gaol, do not pass go, do not collect $200

 

[Jaggannath]

Agreed with SCott on this... insofar as I'm aware, paying tax isn't tax deductible, or it would get ridiculous trying to acquit.

 

[Terry_w]

I just received my tax bill
Are there any problems with the deductibility of interest on my LOC if I use some of it to pay my tax bill?

Yes, an individual cannot claim interest on money borrowed to pay tax.

 

[WillG]

Just to clarify ... the tax you are talking about is Income Tax.

I believe you could conceivably 'capitalise' land tax payments and claim the associated interest. Happy to be corrected

 

[dex]

That sucks :'(

 

[hysterical]

Sorry to hijack but what about paying CGT incurred from selling an IP using LOC ?

Thank you

 

[Rixter]

AFAIK paying tax is a personal expense not related to the activity of owning a property. Go directly to gaol, do not pass go, do not collect $200

/\ /\ /\
+1 above.

 

[HotRod]

/\ /\ /\
+1 above.

But isn't the interest charged by the ATO on overdue taxes deductible?? Would that be the same deal here???

Thought I read that somewhere.

Or maybe I'm getting that confused with the ATO paying the taxpayer interest and they have to declare it as income????

 

[Terry_w]

s 25-5(2)(c) ITAA97 cannot claim deduction for interest on money borrowed to pay tax
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s25.5.html

But

If you are in business then you could borrow to pay tax. This includes sole traders:
ATO ID 2006/269

 

[Rixter]

If you are in business then you could borrow to pay tax. This includes sole traders:
ATO ID 2006/269

Isnt property investment a business?

 

[Terry_w]

Isnt property investment a business?

Not generally.

 

[Rixter]

Not generally.

When does it become a business?? What level portfolio does one need to build to be recognised as a business by the ATO?

 

[Terry_w]

There was a recent case from a few months ago where the persons had 9 properties I think and was self managing. But it all depends on multiple factors - how you conduct it for example. A couple of Ips with a property manager doing the management probably wouldn't work.

 

[Terry_w]

YPFD and Commissioner of Taxation [2014] AATA 9
http://www.austlii.edu.au/au/cases/cth/AATA/2014/9.html

 

[alexlee]

If you are considered to be running a business, though, wouldn't you also lose the CG discount because it'll all be ordinary income?

 

[Terry_w]

If you are considered to be running a business, though, wouldn't you also lose the CG discount because it'll all be ordinary income?

Could be the case.

 

[Blacky]

Could be the case.

And also have to register for GST if your turnover is +$75k?

 

[Terry_w]

And also have to register for GST if your turnover is +$75k?

Not for residential property.

 

[coastymike]

Just because you operate as a business does not mean you lose the cgt discount. A developer can hold an asset on capital account and revenue account. Cases such as scottish australian mining, whitfords beach, cassimaty etc have analysed the concept of revenue vs capital. It is intention that is important.