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Tax Tip 65: Deductibility of Interest for paying out a loan of a deceased estate

Discussion in 'Accounting & Tax' started by Terry_w, 23rd Oct, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Deductibility of Interest for paying out a loan of a deceased estate

    Example
    Tom dies and leaves Bob the property at 123 Smith St. Worth $500,000. It has a loan of $250,000. Tom had no other assets.

    Bob takes the property with the loan - i.e. the loan must be paid for out of the property. So Bob has 2 choices:

    Cause the sale of the property and take the leftover cash, or

    Borrow $250,000 and pay out the loan of Tom

    If Bob were to rent the property will the interest on the loan be deductible?
    Yes probably it will. General rules apply - borrowing to acquire an income producing asset.


    Authority
    See PBR Authorisation Number: 36396
    https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/36396.htm
    (use as a guide, a PBR cannot be relied upon)
     
    larrylarry likes this.