Interest deductions on dual occupancy

Hi all!

I have a tax question regarding a dual occupancy (already subdivided) where both titles are combined under one (interest only) loan of 605k. One of the units is my PPOR and the other I have rented out for the whole year and have attracted approximately 13.5k of interest on the loan.

Throughout the 18-19 financial year, I have had 370K of savings offsetting against the 605k loan (over 50%). Given that I intended for the 370k in savings to offset against my PPOR, I am wanting to know if I will have any trouble claiming the full interest on my loan. The 2 units are identical in size and value & am worried that the ATO may want to see it split 50% (and therefore only half the interest deductible).

My mortgage broker did not suggest to apply for a new loan for each title following the subdivision, however in hindsight, this may have been the best approach to take.

For the sake of a $2000 difference in my tax deduction if I claim the full amount, I would appreciate any knowledge shared!

Kind regards,
Spiro

 

The full amount of interest cannot be claimed

You will need to apportion it based on a reasonable amount. If both properties are similar in build and on similar size blocks. Then a have 50% apportionment may be reasonable.

This look like an easy one to fix moving forward.

 

Going forward, split the loan into the relevant portions and then move the offset to the non-deductible portion.

Can't really blame the broker for not understanding the tax aspects to loan structuring.

 

As brokers arent licensed to provide tax advise they didnt do anything wrong.