Tax deductable LMI if loan is 2nd mort on PPOR?

[Aaron_C]

The test for deductibility is the nexus between the expense and the assessable income that flows from it. I think paying lmi and parking the extra funds in a savings account doesnt cut the mustard

 

[Rob G.]

I think if the new loan was set up near the time of the purchase of the second property and the purpose was entirely for the investment then the LMI should be deductible as it would all relate to the new property.

Rob, any thoughts?

s.25-25 is a specific deduction.

You rely on the drafting more closely, rather than general principles.

Particularly, it allows a deduction of capital expenditure under certain conditions.

Note the strict interpretation of the drafting under CGT provisions which prevent the costs of searching for a future property forming part of the cost base.

Why should s.25-25 capital expenses be interpreted more loosely ?

It would be a brave call to claim LMI on money parked in an offset account with the intention of finding a future property.

Time to pay for some advice on the particular circumstances I think ?

Cheers,

Rob

 

[Terryw]

s.25-25 is a specific deduction.

You rely on the drafting more closely, rather than general principles.

Particularly, it allows a deduction of capital expenditure under certain conditions.

Note the strict interpretation of the drafting under CGT provisions which prevent the costs of searching for a future property forming part of the cost base.

Why should s.25-25 capital expenses be interpreted more loosely ?

It would be a brave call to claim LMI on money parked in an offset account with the intention of finding a future property.

Time to pay for some advice on the particular circumstances I think ?

Cheers,

Rob

Thanks Rob.

However, I wasn't advocating the use of the offset account. Just borrowing with a standard loan.

I think any LMI incurred on a new loan split which would be used solely for the investment property deposit and cost should be deductible under s25.25 http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s25.25.html because the money would be used for the "purpose of producing assessable income". This is assuming the property has been located though.

I may be wrong though.

 

[--(< PJ >)--]

Thanks for all the replies, I posted on here as it was a Sunday and therefore I couldn't reach the people I'd normally ask. We will track down an answer from our friendly accountant but I have a feeling the answer will be, yes as long as it's all 'clean' as stated.

The property we are purchasing will be part of the NRAS (all going well) which limits our choice of lender which is why it was important for us to know what LVR we'll have at settlement. Purchase will be approx 5 months from now.

Anyway thanks again for all the help and advice, will let you know how we get on!

Best of luck! I hope it goes well.