Are IP Loan Fees tax deductible

Discussion in 'Accounting & Tax' started by Keentolearn77, 24th Sep, 2018.

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  1. Keentolearn77

    Keentolearn77 Well-Known Member

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    Hi there

    Just wondering if loan fees and associated costs are tax deductible, loan for construction of IPs.

    Ie: Commercial Loan for construction of IP's (only talking 700k, less than 50% of construction build) but bank serviceability calculations & being 4 townhouses = most likely 'commercial', which means

    1+% loan application fee
    Valuation fees
    Legals
    Capitalised interest ....
     
    Keentolearn77, 24th Sep, 2018
    #1
  2. Terry_w

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

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    You will need to distinguish between different costs, borrowing costs deductible over 5 years.
    Legals generally a capital cost if you are talking conveyancing
    Capitalised interest could be deductible under s8-1 but denied under Part IVA potentially.

    Seek specific tax advice
     
    Terry_w, 24th Sep, 2018
    #2
  3. Ross Forrester

    Ross Forrester Well-Known Member

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    If the loan gets refinanced later on, or paid out, they are tax deductible in full.
     
    Ross Forrester, 25th Sep, 2018
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    Terry_w likes this.
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes, at present. However if the property is not completed by 30 June 2019 it may not be after that date until rents commence (but would add to the property cost for that period) .The govt was proposing to change tax law to stop pre-rental interest deductions

    Loan fees are deductible over the loan term of 60months whichever is shorter. Commercial loans are often refinanced many times in devs and this could complicate issues. There may also be issued with who the borrower is v's the entity undertaking the build sometimes.

    Have you obtained tax advice concerning the project ? Many matters can affect tax outcomes
     
    Paul@PAS, 25th Sep, 2018
    #4