Tax deduction on Loan agreements created after settlement

[ashalim]

Hi all,

I am turning my PPOR unit that i have lived in for 8 months into an IP. I borrowed the deposit for this unit from my parents treated as a "gift".

If I sign a loan agreement with my parents when I turn the unit into an IP, can I claim tax deduction on the interest that my parents are charging me?

Is it too late for a loan agreement as I settled the property 8 months ago? Can I back-date the loan agreement?

Thanks in advance

 

[Terryw]

legally, probably not. A gift is usually unrevockable unless specified. If it was a loan then you could increase the loan on the property and then pay out the loan from the parents.

Don;t forget any interest paid to them in income to them and this may affect centrelink benefits etc

 

[ashalim]

Hi Terry,

Thanks for the feedback. If they are giving me a loan from their equity, that is they are being charged interest by their bank and the loan agreement with me stipulates I have to pay them the same amount of interest as what they are being charged by the bank.

Shouldn't that nullify any earnings they have? (yes both sides still need to declare everything). And in this case, shouldn't I then be able to claim interest deductions?

Regards
ASH

 

[Terryw]

Hi Ash

If by giving you mean lending that would be the case./

 

[ashalim]

Hi Terry,

Yeah, that's what I meant Thanks!