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Borrowing money to cover stamp duty - tax deductible ?

Discussion in 'Accounting & Tax' started by JMica, 16th Sep, 2015.

  1. JMica

    JMica Well-Known Member

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    This has probably been asked before but just to confirm if you borrow money to pay for stamp duty on an investment property is that loan tax-deductible ?

    Does his also extend to other borrowing costs like legal costs?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I'm not an accountant but yeah - it should be.

    It's important that the loan is set up as a separate split to owner occupied lending.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See my tax tip on debt recylcing.
     
  4. 45degree

    45degree New Member

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    what can the mortgaged stamp duty be claimed under? -other expenses ,legal fees or borrowing cost or depreciating assets?
    Many people have told me cannot be claimed only can claim the stamp duty as part of the cost base for when we sell the property, but ATO said it can be claimed.
    I am getting mixed information.
    I have borrowed the stamp duty amount from the bank meaning I am paying interest on that amount, I should be able to claim it,
    Any info would be appreciated.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I think you are confused.

    Mortgage stamp duty has been abolished in NSW now and in most states.

    If you are talking duty on the transfer of land then it would not be deductible as it is a capital expense. Interest on the loan would be deductible against the income of the property.
     
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  6. 45degree

    45degree New Member

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    Thank you Terry_w I just released that I confused my self.
    Cheers
     
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  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    And in ACT stamp duty may be tax deductible when buying a IP.. No wonder some get confused.
     
  8. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Not just in ACT.

    Subsection 25-20(1) of the ITAA 1997 provides that a deduction is allowable for the costs of preparing, registering or stamping a lease of property where the property is used solely for income-producing purposes.

    A crown lease on property in the ACT satisfies a general law requirement of a lease in that leases in the ACT are granted for a definite period. Therefore, section 25-20 of the ITAA 1997 applies to allow costs incurred in the preparation, registering and stamping of a lease property in the ACT that will or has been held by the taxpayer for the purpose of producing assessable income.

    The legislation does not provide that the deduction be spread over either a set period of time or for the duration of the lease. It is implicit, therefore, that the expense can be deducted in the year the expense was incurred.

    Same principles would apply for leases on land in other States as well.
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Mike - Correct, the issue is really that of all land in ACT is leasehold so unlike all other states where "transfer duty" is a capital outgoing its a deductible for an IP in ACT. .......Quite different to the other eastern states.

    I would argue the legal costs of conveyance are also deductible for an ACT IP. Would you agree ? Or too early ?
     
  10. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    i would agree.

    i believe it would be a cost of preparing and registering the lease and therefore deductible.