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Can I offer an interest pay loan to partner?

Discussion in 'Accounting & Tax' started by Fernfurn, 4th Jul, 2015.

  1. Fernfurn

    Fernfurn Active Member

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    My defacto and I keep our finances totally separate. He is buying a new rental house. Could I offer him a loan for some of this and charge him interest he could then claim off his tax?
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Get some tax advice, but it is possible if set up properly. incorporate it into you wills too.
     
  4. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent Business Member

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    Must be a commercial loan agreement. Should security be provided ? What is the interest rate that should charged ? If you have already loaned funds from the bank and onlending those funds will such an agreement make you in breach of your loan agreement with your current lender ? Is an on lending agreement even possible ? What will be the tax effect for your partner ? Terry has done many of these before.
     
  5. tobe

    tobe Well-Known Member Premium Member

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    And obviously you would need to declare the interest as income and pay tax on it.

    Unless you were in radically different tax brackets it's a zero sum game isn't it?

    Or am I missing something?
     
  6. Gockie

    Gockie Be the change you want to see in the world Premium Member

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    My partner and I split out our finances. He's ultra conservative and not into property investing. Anyway, I just managed to get him to give me a loan for my next investment cause the bank has become less generous so my next deal can happily cross the line.

    I still cant use his income on any loan applications and we'd be miles ahead if I could have, but that's all history...
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Also in addition to what Gockie mentioned it can allow a higher deductible loan.

    e.g. $100,000 purchase. No other equity so Mr lends Mrs $20,000 and Mrs borrows $80k from ANZ. A year later the property is worth $150,000. Mrs increases her loan with ANZ to $100,000 and pays back Mr. The interest on the full $100k is deductible going forward - for the next 30 plus years (assuming set up correctly).

    Mr using his own $20,000 cash would be taking that cash out of the PPOR offset perhaps, meaning higher undeductible interest.
     
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