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trying to understand the borrowing expenses for my investment loan

Discussion in 'Accounting & Tax' started by joe2030, 9th Jul, 2015.

  1. joe2030

    joe2030 Well-Known Member

    Joined:
    25th Jun, 2015
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    Location:
    Umina Beach
    I am trying to understand the borrowing expenses for my investment loan.

    According to the following ato page,
    https://www.ato.gov.au/General/Prop...perties---claiming-borrowing-expenses/?page=2

    You can claim all of the following:
    • stamp duty charged on the mortgage
    • loan establishment fees
    • title search fees charged by your lender
    • costs (including solicitors' fees) for preparing and filing mortgage documents
    • mortgage broker fees
    • fees for a valuation required for loan approval
    • lender's mortgage insurance, which is insurance taken out by the lender and billed to you.
    My Loan includes the following fees ( Aussie Home loan ) as the follows:

    • QLD Registration Fee Mortgage $162.90 <- as "loan establishment fees"?
    • QLD Registration Fee Discharge $162.90
    • QLD Registration Fee Transfer $409.30
    • Legal Fee $363.00 <- as "costs for preparing and filing mortgage documents"?
    So that I can claim QLD Registration Fee Mortgage $162.90 + Legal Fee $363.00 over 5 years?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Nope.

    What is the legal fee for? conveyancing solicitors don't prepare mortgage docs or file them, bank solicitors do this.

    Registration of mortgage is a borrowing cost. Discharge of mortgage you would be reimbursed for from the vendor.

    Transfer is a purchase cost and not deductible.

    So none of those costs would be deductible.
     
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  3. joe2030

    joe2030 Well-Known Member

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    Umina Beach
    Thanks, Terry. I found the document from my broker, which tells the same amount in the "Settlement Fee". I will confirm with the lender about the legal fee.
     
  4. HomeMinister

    HomeMinister Well-Known Member

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    Surely the big chunky LMI is deductible for 1/5th each year.
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    No it is deductible over 1826 days. Seems the same as 20% but consider the calculation for the first year and its very different. Year one will be a partial deduction as will year 6. Year 2-4 will each be 20%

    ie: Property acquired April 15:

    2015 - 3mths
    2016-2019 12mths
    2020 9 mths ....Total = 60 months.

    The ATO just completed a widespread audit of rental borrowing expenses and this was a common error.
     
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  6. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Yes although the ATO got a lot of criticism for the way they handled things with that particular audit. Basically accusing people of having made an error where many had not.
     
  7. joe2030

    joe2030 Well-Known Member

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    Location:
    Umina Beach
    For this loan, LMI is not included because I borrowed 80%.
     
  8. joe2030

    joe2030 Well-Known Member

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    25th Jun, 2015
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    Location:
    Umina Beach
    Hi Paul, thank you for reminding me this calculation.
    By the way, I need to find out the total borrowing expenses. Do you ( as a tax specialist ) have any idea for these fees?

    • QLD Registration Fee Mortgage $162.90
    • Legal Fee $363.00
     
  9. joe2030

    joe2030 Well-Known Member

    Joined:
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    Posts:
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    Location:
    Umina Beach
    I have a reply from the lender.

    Just a breakdown of what the fees are:
    $363.00 is the Legal fee for preparing and settling your loan.
    The QLD registration fees is charged by the Titles Office. They are fees they charge you to lodge the mortgage, Discharge and Transfer.
    As we are not a Tax Agent, we cannot give you advice what is claimable under Tax. All we can do is provide an explanation of what the fees are

    As a result, I believe the following 2 items for borrowing expenses.
    • Legal Fee $363.00 seems "loan establishment fees".
    • QLD Registration Fee Mortgage $162.90