Detuctability of borrowing expenses when purchasing property

Hi,

While preparing the excelsheet of income/expenses, I am calculating the borrowing expanse for the property we purchased earlier this year. I know I can ask my accountant when I give him the excelsheet but just to minimize his work I would like to calculate it upfront and learn something in the process.

Following expenses incurred during the settlement of our property earlier this year.

Electronic file fee - $130
Upfront fee - $8460 (latrobe ripping us off with massive application fee)
Disbursement fee - $120
Property valuation fee - $305
Pexa lodgement fee - $283
Pexa fee - $56
First title - $517
----------------------
Total = $9871

1st year claim = 9871/5 = $1974

Question:
Is this correct? Or there are certain items from above list that can be claimed 100% in same year (instead of spreading over 5 years).

Edit: sorry about the typo in subject line. google chrome auto-correct is to blame.

 

not correct unless you settled on 1 July

 

Thanks @Terry_w for the hint.

Property was settled on 18th Jan 2019 so number of days leading upto 30th June 2019 are 164.
5 years = 1827 days

So,
$9871 x 164/1827 = $886 for 1st year.

Is this correct?

 

I can't verify the maths but you would have to apportion in the first year and the 6th year.

 

Destructabilty ? Borrowing expenses are kryponite for investors.

There are 1826 days in a 5 year period. 4 x 365 and 1 x 366 days

 

windows auto-correct sucks...

I took example from ato website where they used 1827. But I got your point. It has to be calculated for each year.

Thanks @Terry_w.

Should all items (from my first post) be spread over 5 years? or
Is there any item from that list that can be deducted 100% in first year?

 

They all look like borrowing expenses to be so deductible over 5 years - or the life of the loan if refinanced earlier.

 

None.

 

Thanks @Terry_w and @Paul@PFI

 

Without looking at where those costs have come from, I would possibly argue that some of them are settlement costs and therefore cost base items as opposed to borrowing costs.

With regard to days, yes you need to apportion based on the total number of days and pro rata in the first and final year. Generally 1826 days for 5 years, but you could get 1827 if you settled mid Feb 2020 as you will straddle 2 leap years.

Borrowing costs under $100 are deductible in full also.

 

Borrowing expenses includes fees and charges imposed by a lender to take security. Fees and charges on the solicitors settlement sheet will be cgt costs excepting revenue adjustment items.

Total borrowing expenses under $100 are deductible. You can pick out those under $100 and deduct them.

https://www.ato.gov.au/uploadedFile.../TaxTimeToolkit_Rental-borrowing-expenses.pdf

To clarify the ATO are referring to the BANK solicitors etc. Not your own solicitor. But I have seen people incur legal costs for related party borrowing and this can then be a factor

 

Hi,
The pdf below mentions Stamp duty on the mortgage as being deductible... what is this referring to please?
Thanks

 

There used to be duty on mortgages. But this has been abolished in most if not all states now

Legal Tip 18: Mortgage Stamp Duty (focusing on NSW) https://propertychat.com.au/community/threads/legal-tip-18-mortgage-stamp-duty-focusing-on-nsw.1008/