Loan Contract Wording

[argentina]

I have taken up an issue with my lender in respect to refinancing an investment interest only loan. It is a split loan. Part of it being my PPOR and the other part being investment.

The loan contract says security is my PPOR. I know this is not ideal, but the investment portion is small and i understand why my PPOR needs to be used as security.

However, the loan contract also says
Purpose of Loan: domestic
The loan contract states that The lender will pay the loan in accordance with the direction of myself or a person on my behalf but only if that direction satisfies the purpose of the loan.

To me the above clauses seem to be a contradiction in respect to the fact that part of the loan is investment. The lender has verbally and via email agreed that definitely part of the loan is for investment however they said the purpose of loan and direction of paying the loan has to match the security. Hence that is the way it is worded and they are unable to change it.

My concern is that this wording could be construed by the tax office as not being part investment loan and therefore disallow any tax deduction on the investment interest component.

 

[Rolf Latham]

purpose of the loan and what you spend the $ on matters more than what a legal wally lending contract says.

But seek specific tax advice if its of ongoing concern

ta

rolf

 

[Aaron_C]

Oh that doesn't sound like a big deal for me. It's just an ****-covering provision to satisfy the NCCP provisions that you are going to use the loan for 'personal' reasons or 'personal investment' purposes so that it falls under NCCP and is not unregulated.

 

[Shaneelastic]

This is why accountants make easy dollars with questions like these

 

[argentina]

This is why accountants make easy dollars with questions like these

Thanks everyone for your reassurance on this issue. I am studying accounting. 10 years bookkeeping/BAS experience but tax is in a league of its own and not all accountants have experience in all areas. So worth shopping around for the advice.

 

[Terry_w]

Domestic determines what they are lending for - not commercial but private household type debt. This would probably include residential investment.

The ATO will be looking at the purpose you borrowed the money which would be to buy a property, hopefully, and then look at the use the funds were put - to the purchase of that property hopefully again.

 

[argentina]

Domestic determines what they are lending for - not commercial but private household type debt. This would probably include residential investment.

The ATO will be looking at the purpose you borrowed the money which would be to buy a property, hopefully, and then look at the use the funds were put - to the purchase of that property hopefully again.

Thanks. That makes sense. As the re-financed loan is directly used to pay off an existing investment loan and I have proof of that then i think I am satisfied that this should meet tax deduction requirements.