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20% Deposit on the split loan

Discussion in 'Accounting & Tax' started by Serah, 10th Apr, 2016.

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  1. Serah

    Serah Well-Known Member

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    Hi All,

    Not really sure how to start this question but here goes.

    Our split loan for the 20% deposit was not really when we purchased our IP. So once the split loan is ready I did the transfer from our main offset to the 20% loan for all the transactions taken to acquire this IP (just an in/out will nill offset). These transactions are traceable. Just wondering if ATO is ok with that or not. :) Hoping that the ATO will be ok.

    Cheers,
    Serah
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    not sure what you mean.

    Where did the funds come from that you paid the expenses with?
     
  3. Serah

    Serah Well-Known Member

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    Come from our main account going to the 20% loan and out off the 20% loan back to our main account. It has no effect to the balance off the loan but just want to show that those transactions did occurred.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    York likes this.
  5. Serah

    Serah Well-Known Member

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    This is sad, only a month of timing difference. Cant we explain to the Ato?
     
  6. Serah

    Serah Well-Known Member

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  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No way to fix it other than to sell and buy again which would cost too much.

    ATO cannot allow something that the law doesn't allow.

    it's not the end of the world, you just won't be able to claim the interest on these costs.
     
  8. Serah

    Serah Well-Known Member

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    Aww no just want yo kick myself in the ass. I could have bought myself new skies and boots every year.....
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Oh well, you know your mistake now so you won't repeat it!

    It just shows the value of getting some tax advice upfront.
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    This is a good example of the concern with "reimbursing yourself". Technically you cant do that. Its essential that loan proceeds are used to directly pay for these costs thus increasing the loan...Its then a borrowing. Paying using cash, savings etc mean you can never reimburse it and call it borrowed funds. The borrowed funds must be used from the start. If you had initially paid for the costs on a credit card and then drawn funds from loan to repay the card its often OK as its a refinance of the card (loan) to a loan.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Serah did you yourself make the payments already or was it someon else?
     
  12. Serah

    Serah Well-Known Member

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    Hi Terry,
    I made the payments already. I dont understand why i cannot claim. All transactions are traceable and the purpose of creating this loan is for investment. I know it would be cleaner if all costs were paid from the split loan but at the time the split loan wasn't ready.
    Very sad....
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I was thinking if your spouse had paid for something on your behalf then you may have been able to borrow to reimburse him/her.

    Its not the purpose of the loan, but the use of the borrowed funds that counts.

    You have already paid for something, say a letter box. If you already own it you cannot borrow to acquire it. So any loan won't be related to the purchase of the letter box, but to just put money back into your pocket.

    Actually if it is the deposit we are talking about there may be hope. After getting tax advice See
    https://propertychat.com.au/community/threads/tax-tip-53-paid-deposit-with-cash-how-to-fix-big-mistake-before-settlement.4661/
     
  14. Serah

    Serah Well-Known Member

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    Thanks Terry. I am seeking tax and legal advise. Good lesson to learn. I will not make this mistake with my future IPs.