Join Australia's most dynamic and respected property investment community

Deductibility of broker fee for service on LOC against PPOR

Discussion in 'Accounting & Tax' started by dant, 4th Mar, 2016.

  1. dant

    dant New Member

    Joined:
    3rd Feb, 2016
    Posts:
    3
    Location:
    QLD
    Hi,
    If refinancing the PPOR and setting up a LOC secured against this for future investment how is the following treated please:

    • will the LOC be able to have a normal interest rate vs a higher investment rate? LOC rate at same rate as PPOR through Resimac Platinum. It would be one loan split into two portions secured against the PPOR. The LOC will eventually be used as a deposit for an IP.
    • if charged a brokerage fee (no lender commission to the broker) on the whole setup but split across the two portions can the LOC portion of the fee still be deducted over 5 years?
    Many thanks,
     
    Last edited: 4th Mar, 2016
  2. York

    York Finance Broker Business Member

    Joined:
    24th Jun, 2015
    Posts:
    1,622
    Location:
    Sydney
    LOC rates are generally higher than term loan rates. The broker fee isn't normally paid by you. It's paid by the lender. So no, it wouldn't be deductible.
     
  3. dant

    dant New Member

    Joined:
    3rd Feb, 2016
    Posts:
    3
    Location:
    QLD
    Thanks. I have edited the initial post to reflect changes you addressed York
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,029
    Location:
    Sydney
    You should make sure the LOC has a separate account number.
    Any broker fee would be deductible as a borrowing expense if it relates to a specific property purchase. But it seems you don't have a property as of yet and you are splitting an existing loan which relates to a owner occupied property. Therefore is a bit of a grey one on whether it could be deductible. If incurred in a different financial year to the property then probably not, but if incurred in the same year maybe.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,029
    Location:
    Sydney
    A possible solution may be to ask your broker to do the investment loan too and to charge you for this instead of the LOC.
     
  6. dant

    dant New Member

    Joined:
    3rd Feb, 2016
    Posts:
    3
    Location:
    QLD
    Thanks Terry.
    Did you mean a preapproval would suffice irrespective of financial year?
    Cheers
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,029
    Location:
    Sydney
    Perhaps.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,029
    Location:
    Sydney
    A pre approval me be too soon. Where a property is not purchased in the same year there may be issues.