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Tax Deductibility on loans - credit card reimbursements

Discussion in 'Accounting & Tax' started by SaberX, 4th Oct, 2016.

  1. SaberX

    SaberX Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    197
    Location:
    WA
    Hi resident tax gurus, quick question:

    Having a loan for a new land + build, I have been getting things such as the building/stage inspections disbursed through the home loan.

    My understanding is when/if I ever eventually switch this to an investment property if I move say interstate, I could then easily /simply just deduct 100% of interest on the loan on the property? I assume from a tax point of view these disbursements through the home loan - in addition to the initial land purchase plus building progress payments - for things such as building inspector, 3rd party tradies e.g. buying the lights and having electrician install them and paid via the loan account , are all considered part of the total home loan required to get the house up and running and while they get added to the 'capital cost base' of the home for eventual sale, the interest incurred on borrowings can be deducted once I get rental income to offset against?

    on that regards I had one new building inspector who doesn't accept bank transfer/payments for their final PCI inspection work and therefore I could not disburse via my bank and had to pay by my personal credit card. I am now looking to submit a claim with the full invoice/backup to my bank to have this reimbursed to my personal accounts, to in turn pay off the credit card so that I can essentially put this on credit (as I don't have much personal spare cash and don't want to have to pay it off personally just yet).

    Would these (from a tax pov) reimbursements take on a 'look through' nature, that is the tax office would look as if the amount was disbursed directly to the inspector and therefore not personal in nature? Surely given I'll be submitting all the relevant documentation for the reimbursement I am not going to have a situation of being accused of personal withdrawls tainting the total loan amount?

    Basically want to ensure 100% of the home loan can be interest deductible if/when I ever begin renting out.... thoughts/opinions?? I assume again this final PCI inspection would still add to my capital cost base of the total house...

    Appreciate any thoughts - the sooner the better, before I submit any reimbursement disbursement form to the bank? If I paint the house myself I was also planning to submit my receipts for materials/paint and assume that the home loan would remain untainted by doing so, as this is all house work?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See my tax tip on this topic
     
  3. SaberX

    SaberX Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    197
    Location:
    WA
    Hi @Terry_w were you referring to this tax tip:

    Tax Tip 5: Reimbursing yourself - Impossible

    If so, what is the rationale behind this being impossible? How does the underlying tax treatment differ as rather than paying the inspector directly you are paying for it via your personal credit card, before the home loan reimburses you, so the see through effect would be similar to having paid it direct?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    There is another one i wrote on credit cards too.

    Once you pay for something you cannot borrow to acquire it as you have already acquired it. But a credit card is a loan and loans can be refinanced.