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Are loan costs tax deductible immediately or a capital expense?

Discussion in 'Accounting & Tax' started by jaybean, 9th Jul, 2015.

  1. jaybean

    jaybean Well-Known Member

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    I have been charged 3 fees:

    1) Bank establishment fee
    2) LMI processing fee
    3) Settlement fee
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    neither.

    Borrowing costs are deductible over 5 years or the life of the loan. Settlement fee in relation to transfer of title is a capital cost, but settlement in relation to a loan would be a borrowing cost.
     
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  3. fullylucky

    fullylucky Well-Known Member

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    QLD
    1) Bank establishment fee
    just deduct it immediately under Borrowing Expenses (E).

    2) LMI processing fee
    Borrowing Expenses (E). think about it this way if you didn't buy the investment property you wouldn't have to pay this fee do you?

    3) Settlement fee
    is this like fee for attending settlement? that's Borrowing Expenses (E)

    Any interest charged for the loan can be deducted under Interest (L).

    You can't deduct stamp duty that's part of the cap gains calculation.
     
  4. Blacky

    Blacky Well-Known Member

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    Im so glad you joined the new forum. Welcome

    :)
     
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  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Ignore the post above. Its wrong.

    1) Bank establishment fee
    Not deductible immediately. Deduct as a borrowing cost over loan term or 60mths which ever is shorter. If refinanced later the balance may become deductible at that time.

    2) LMI fee
    This is also a borrowing exp. See above.

    3) Settlement fee, stamp duty, legals on acquisition etc
    Capital costs that add to cost base of property and reduces future cap gain.

    Tip : Get a QS report unless a QS says its not worthwhile. Don't prepare your own schedule like some fools may suggest.
     
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  6. Blacky

    Blacky Well-Known Member

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    One tick... just gotta put the popcorn on.
     
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