Paying deposit - ownership/tax consideration

Hi PCers,

This may sound like a dumb question, but does the name on the bank account or on the cheque have any bearing on who can claim bank loan interest when paying a deposit on an IP?

My scenario is property will be in partners name. But LOC is joint name and linked cheque book in my name only. Presumably tax deductions will be based on ownership nomination of property not who's account the money came from?

Thanks in advance for any comments.

 

Think about borrowing the deposit from a related party - like your dad or a trust. This allows for refinance later on.

But in answer to your question - no. The deductions for interest and the like relate to ownership of the property not where the deposit originated.

 

Yes it can have many legal implications. The owner of the property should pay the deposit and not someone else. If the deposit's origin is another person that person should formally lend the money to the borrower.
See for example
Legal Tip 106: Resulting Trusts Legal Tip 106: Resulting Trusts

If the LOC is in the names of A and B then
Tax Tip 79: Interest Deductibility for 1 on title 2 on loans Tax Tip 79: Interest Deductibility for 1 on title 2 on loans

 

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Thanks for the interesting links especially on Resulting trusts. Yes the joint name LOC was the only way for us to be able to service the loan, and as my partner earns more and could potentially move into a higher tax bracket we figured the negative gearing benefit would be greatest keeping it in the higher earners name only. Im not as concerned with asset protection beyond what insurance can provide.

 

Its not dumb to ask. Tax deductions are based on ownership interest and how borrowed funds are utilised to acquire property. How does asset protection get insured ? Owners get indemnified by insurers to specified limits and conditions to cover.