tax queries

[s0805]

Hey guys,

settled on my first IP this in 2012-13. I am with one of the big four with their professional package...which basically gives away free offset, free savings account, CC with no annual fees and unlimited number of loan accounts (in my case it has PPOR loan, Equity loan, Resi investment loan)......

being tax time do any of you think, this professional package annual fees ($400 something) can be tax deductible....if yes can you tell me how you proportionate that claim....

Also, if anyone did gov's super co-contribution last year, do you claim this deduction in tax or say nothing in it.....

cheers

 

[Paul@PFI]

Bank Package Fee

This is a problem a client threw at me recently. The ATO view on this is vague and needs to be based on a reasonable approach. Let me explain:

The client used a Westpac facility that costs $395 pa. It includes a 0.80% discount on variable rate loan and a .25% discount on fixed. It avoids a $10pm fee on a savings account and an annual card fee for a credit card. The savings acct and card are obviously private. The loan is split fixed 60% and variable 40% and is for a IP. How do they apportion?? A : No idea.

We understood the predominant reason was not the card fee or the account fee but the loan interest discount. But these had some value. How much ? Who knows? Too hard and can be measured ten different ways. I recommended to that client for their circumstances that 80% could be deductible on a reasonable basis. Client asked why not 100% - A = Its probably not reasonable to make a assumption its a 100% deductible benefit. Its also not reasonable to value it based on deducting the value of private benefits from total cost or by calculating the value of the annual saving and apportioning cause of compounding !!

Paul
www.pricefinancial.com.au

 

[s0805]

Paul, thanks for the explanation. I can't find any explanation on ATO either....i am not sure with 80% claim your client has PPOR loan part of that package as well or not...in my case i do....i think proportionate investment debt % from PPOR debt % and 10% for CC and savings accounts would be fair....

 

[MelbGal]

I'd probably agree to apportion because it is reducing fees on other products that you may also using for non-investment reasons such as credit card for personal purchases or rate discount off your ppor loan etc?

My tax agent just claimed the lot, maybe he was being lazy or just thought it was an immaterial amount to apportion??

 

[marks]

I asked about this fee once and my accountant (at the time) said it was a private expense.

My reasoning was that fee saving me from deducting interest as an expense many multiples of that fee.

What about the argument that, to derive an income (salary as well as property income), I need a bank account. If I don't, I can't get paid by my employer or tenants, nor reduce the way to pay the ATO if required, without further fees.
If I had a premium package, all I'm doing is reducing business and personal costs and pre-paying my monthly bank fee.

Comments?

 

[JPS25]

We claimed a professional fee for the last 3 years in full, this year the fee was waived. Never had a problem claiming it but has always been investment only never mixed.
We started with 1 IP, 1 credit card use for IP only and 1 Mortgage Crusher account all for investment only. Our PPOR at the time was completely separate account as was personal spending. PPOR now fully paid out. The Pro pack now has 6 loans (3 Ip's) attached to it. The credit card and Mortgage Crusher with both 100% offset and redraw available are all only used for Investment requirements.
We have separate accounts for personal use therefore even without the fee being waived this year are accountant would have been claiming it at 100%.

 

[s0805]

We started with 1 IP, 1 credit card use for IP only and 1 Mortgage Crusher account all for investment only.

wat is motgage crusher???

Marks, sorry i don't understand your comment.....

even if PPOR is part of Professional package, i think you can still claim fee surely not 100% though)...there are no ATO guidelines around this but you have to be reasonable in calculating your investment related portion...now if it is 60%, 80% is anyone's opinion....

 

[JPS25]

wat is motgage crusher???

Marks, sorry i don't understand your comment.....

even if PPOR is part of Professional package, i think you can still claim fee surely not 100% though)...there are no ATO guidelines around this but you have to be reasonable in calculating your investment related portion...now if it is 60%, 80% is anyone's opinion....

Mortgage Crusher just the name of the account it has a 100% true offset and also has a re draw facility too.

You don't need to have a professional package to have it we had one attached to our PPOR too until we paid it out.

Ask your accountant he/she should know but you may have to apportion it as you also have a personal PPOR under same package

 

[SYD]

Why can't you claim an annual bank fee as a tax deduction?

SYD

 

[coastymike]

it depends what the annual bank fee relates to.

 

[Paul@PFI]

Mike

Mike's right. If the fee is for homeloan then forget it. If the IP loan gets a lower rate its got a connection. If you ONLY ue one service from bank (IP loan) then 100% deductible but that is unlikely.

Remember "reasonable" is what ATO always use. as their benchmark. They arent going to argue over $42 difference in points of view. If you deduct 100% they might. There are so many ways of looking at this issue. Just be reasonable. Too much overthinking.

Paul
www.pricefinancial.com.au

 

[s0805]

it depends what the annual bank fee relates to.

mike, these type of products normally has
1) some points of variable/fixed loans (any type of loan PPOR/IP)
2) CC without annual fee
3) Free offset account
4) Free savings account
now as of above only part of 1) is related to IP (at least in my case).....I am sure i can't claim 100% of these fees...but some 'reasonable' amount.....

 

[Terry_w]

To what extent is

1. the proportion of the loans being investment v private
2. the use of the offset account for investment v private
3. the use of the cc investment v private

Work out some reasonable formula which you could apply.

 

[s0805]

To what extent is

1. the proportion of the loans being investment v private
2. the use of the offset account for investment v private
3. the use of the cc investment v private

Work out some reasonable formula which you could apply.

thanks terry...number 2 and 3 are for private.....as there are four separate products given as part of this annual fee (25% each)

then i guess i just have to figure out what proportion on 1 is for investment like (dividing IP loan balance by PPOR loan balance).....use this % of that 25% amount....

cheers