Residual loan - property sale - any tax deduction?

Discussion in 'Accounting & Tax' started by robotpants, 25th Nov, 2019.

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  1. robotpants

    robotpants Member

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    Hi all,

    I'm looking at selling a property soon at a loss and there will be a leftover loan. What happens to the interest that i will continue to pay. I don't believe it will be tax deductible as there is no asset. Is that right? Does it just become a cost or is there some other way i can claim it?
     
    robotpants, 25th Nov, 2019
    #1
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Hello robotpants :) Cool name ;)

    I'm no expert but my understanding is that if the original loan related to an INV property, it may be deductible. Confirm with your accountant, but I'm pretty confident that's the case.
     
    Jess Peletier, 25th Nov, 2019
    #2
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Why will there be a loan left over? If it relates to the purchase of the property the interest could continue to be deducted potentially

    Tax Tip 71: Deduction of interest after assets sold Tax Tip 71: Deduction of interest after assets sold


    Tax Tip 212: Claiming Interest after Sale of Asset at a Loss Tax Tip 211: Claiming Interest after Sale of Asset at a Loss
     
    Terry_w, 25th Nov, 2019
    #3
  4. robotpants

    robotpants Member

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    Leftover loan as the sale proceeds won't meet the value of the loan. Thanks Tip 212 means it could be.
     
    robotpants, 25th Nov, 2019
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  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Assuming that the property was a income producing property and also subject to CGT (owned by a taxpayer) then any residual loan interest may continue to be deductible after the property is sold.

    Recent law changes may impact this if the property was vacant land. I have identified a potential "blackhole" if the sale does not discharge the value of a loan for land. It may or may not be deductible after sale. I have noted to seek a ruling on this issue.
     
    Paul@PAS, 25th Nov, 2019
    #5