Unclaimed loan interests

Discussion in 'Accounting & Tax' started by casuarina, 9th Jul, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
  1. casuarina

    casuarina New Member

    Joined:
    19th Jan, 2018
    Posts:
    2
    Location:
    VIC
    Hi everyone, I've got a question about interests on loans taken out for rental properties. If one does not claim any deduction of interests on a rental property loan in a certain year, can these unclaimed interests be added to the cost base of the rental property?

    Let's say, I took out a loan to purchase a rental property in 2017. In 18/19 tax year, the loan incurred a $5,000 interest, and I do not claim this $5,000 deduction in my 18/19 tax return. Then 10 years down the track, in 2029 the rental property is sold. Can this $5,000 be added to the cost base of this rental property to work out the capital gains tax?

    Any thoughts would be much appreciated.
     
  2. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,583
    Location:
    Australia wide
    Yes. 3rd element cost base expense if not claimed
     
    craigc and ChrisP73 like this.
  3. Yasharora

    Yasharora Member

    Joined:
    18th Jun, 2019
    Posts:
    11
    Location:
    Melbourne
    Technically, you should go back and amend your return to claim the interest. from my understanding, you can only add non-deductible interest cost to the cost base and the interest that you didn't claim was deductible in nature
     
    Terry_w likes this.
  4. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,583
    Location:
    Australia wide
    Actually Yasharora might be right.

    s110-55(4) ITAA97 has the words 'could have deducted' in it so as it would exclude interest that hasn't been claimed but could have been claimed.
     
    Last edited: 10th Jul, 2019
    Perthguy likes this.
  5. craigc

    craigc Well-Known Member

    Joined:
    25th Jun, 2016
    Posts:
    459
    Location:
    Melbourne
    Wasn’t there a similar tax tip on this Terry_w?

    Along lines of not claiming expenses where the individual’s effective tax rate = 0%, instead use them against future capital gains.
     
    Terry_w likes this.
  6. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,583
    Location:
    Australia wide
    craigc likes this.
  7. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,583
    Location:
    Australia wide
    I just amended my tax tip 204 to include this:

    Found something to support my position
    TD 2005/47

    11. Sybil is not required to reduce the cost base of the property by the amounts that she did not deduct under Division 43 of the ITAA 1997 for the income years ended 30 June 1998-2000, as she cannot deduct these amounts at the time of lodging her income tax return for the income year ended 30 June 2004 - the time periods prescribed for amending assessments for those income years having then expired.

    Legal Database
     
    craigc likes this.
  8. casuarina

    casuarina New Member

    Joined:
    19th Jan, 2018
    Posts:
    2
    Location:
    VIC
    Terry_w likes this.
  9. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    15,205
    Location:
    Sydney or NSW or Australia
    So, in this instance would the interest cost be amortised and added to the cost base for the calculation of CGT as the time to amend the tax return has lapsed?
     
  10. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,583
    Location:
    Australia wide
    Yes I think so
     
    craigc likes this.