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Claim Tax Deduction on Wifes Purchase using my Equity

Discussion in 'Accounting & Tax' started by New Town, 28th Sep, 2016.

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  1. New Town

    New Town Well-Known Member

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    Hi All

    If I use equity in my property to pay the deposit for wife's new IP in her name, can I still claim my interest repayments as a tax deduction?

    ie I have an LOC on my PPR which is in my name only, if I transfer money as a deposit on a property she is to own, can I claim the tax deduction on the deposit interest repayments?

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You cannot use equity as a deposit. You will need to borrow. This has no relation to the production of income so the interest would not be deductible to you.

    What you could do is borrow and lend to your wife, under a written loan agreement on market terms, and then she may be able to claim the interest on this loan as a deduction if she uses the borrowed money to acquire a property.
     
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  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Your wife would need to borrow the $ from you. A lawyer like Terry can assist with the agreement and then it must be settled correctly so that you wife receives the borrowed funds and then they are correctly and directly applied to the deposit. No short cuts. It maybe simple if you "back to back" your new loan so in essence it is hers.
     
  4. New Town

    New Town Well-Known Member

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    Thanks Gents. Thought it might be permitted as the married partner could be seen as a single unit but as you say not allowed.

    I won't go the loan route as it may make things tense around the dinner table when I put up interest rates ;)

    Out of interest, so I could either loan her my savings or if I were to borrow what sort of loan would I seek from the bank? some kind of non-recourse loan?
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    NRLs arent usually deductible.

    Your wife needs to borrow your $ OR use another source of finance. The lender may allow you to be a co-borrower but not on title. Just take care that the lender doesnt cross your title with her borrowing.
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you could loan her savings, the interest may be deductible depending on the circumstances.

    If you want to onlend then you should seek a LOC or a IO term loan depending on the lender.
     
    New Town likes this.