Tax deductibility of a loan not in the owner's name

[DonG]

Suppose I were to take out a loan against my PPOR to put towards a deposit for an IP. My wife borrows the remainder as a separate loan. Ownership is entirely in her name.

Can the interest on my loan be deducted against my wife's income?

 

[Rolf Latham]

im not an accountant

Id say yes, due to the purpose of the funds.

To be safe have a loan agreement in place perhaps ?

ta
rolf

 

[Terryw]

You would essentially be on-lending the funds, charging the wife the same interest as you are paying. Net result is wife claims.

 

[Rob G.]

Suppose I were to take out a loan against my PPOR to put towards a deposit for an IP. My wife borrows the remainder as a separate loan. Ownership is entirely in her name.

Can the interest on my loan be deducted against my wife's income?

You can only deduct interest expenses in earning YOUR assessable income ... not somebody else's.

Your wife has not incurred the loan liability expense and neither can you deduct the interest yourself since you do not earn income from the loan.

However, subject to Part IVA tax avoidance issues, you could make a commercial loan to your wife.

You have a secured loan, however if the loan to your wife is unsecured you would need to charge an unsecured market rate to her.

The interest paid by your wife could then be deductible, but it is income to you ... against which you deduct your interest expense.

Of course, your wife's lender may have been led to believe that your wife has no other loans when she "provided" the deposit ... loan serviceability etc.

This is hypothetical, because the facts given are very incomplete.

Cheers,

Rob