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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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    Yes but he would have to declare it as a liability on his bank finance application.
    You'd want to have a proper loan agreement/contract too.
     
  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

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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

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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 I'm an ISTP-A female, so I might be a bit quirky! 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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