Accountant reviews loan agreement interest denied

Discussion in 'Accounting & Tax' started by Mike A, 11th Jan, 2020.

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  1. Mike A

    Mike A Accountant

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    An accountant reviewed a loan agreement for a client

    During audit the ATO denies the interest deductions as some clauses cause some issues

    Client is denied deductions and PI insurer says sorry thats legal advice. Complaint made to TPB and practitioner runs the risk of losing their license

    Competitor finds out makes a complaint to tpb and watch the sparks fly.

    Its happening believe it or not
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    non-lawyers giving legal advice! Bet he said 'see a lawyer but....'
    The problem is that clients don't know what is legal advice and what is tax advice, they believe that if a 'professional' says something they can rely on it. they even believe mortgage brokers.

    A tax agent could be struck off from the register by the Tax Practitioners Board for giving legal advice.

    Last year I had a private ruling done on an onlending loan agreement and the ATO said the agreement was not on commercial terms and therefore interest on the amount lent to the trustee of a trust would not be deductible, and not deductible for the borrower either..
     
  3. Mike A

    Mike A Accountant

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    It would be professional negligence to not refer to a lawyer or at least say i cant confirm that the interest will be deductible based on the loan agreement but provided it is complying then ordinarily it would be deductible

    But if a client asks if their particular agreement would stand up i believe you have entered the realm of professional negligence

    Ive seen cases where people prepare their own agreements and ask is the interest deductible

    Standard response “seek a private ruling or independant legal advice” i have no idea and nor can i comment.
     
    Terry_w likes this.
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I am endlessly asked this issue. I often need to advise that the client needs legal advice. I will only claim a deduction when that advice is given. Then it becomes...."but what about if I" by people seeking to avoid the cost of legal advice ......I have referred probably four in the past 5 weeks and I was away for 2.5 weeks.

    I generally will advise that in the absence of legal advice then no deduction may be available. Legal advice will confirm the position. This then demonstrates to the client the value is in the legal advice.

    Often the client will show me unsigned documents too. Or self created "legal agreements".
     
  5. Hurri

    Hurri Active Member

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    Hi Paul,

    Would you have any recommendations for good lawyers with this type of matter?

    Cheers
     
  6. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Most solicitors in practice.
     

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