Borrowing Costs

We’ve just added a new document to our site on Borrowing costs so I thought I’d share it with you all.

Borrowing Costs

Under Section 25-25 of the Income Tax Assessment Act you can deduct expenditure incurred for borrowing money, to the extent that the borrowed money is used for the purpose of producing assessable income.

What is classed as a Borrowing Cost?

Loan establishment fee
Mortgage registration fees
Title search fees
Mortgage brokers fee/commission
Stamp duty on the mortgage
Valuation fee charged by the lender
Lenders Mortgage Insurance (LMI)
Legal costs in relation to the mortgage
Underwriter’s fees

How do I claim Borrowing costs in my Income Tax Return?
Your Accountant will calculate this for you. In most circumstances the total sum of all borrowing costs is spread over the period of the loan or 5 years, whichever is the shortest. So if you repay/refinance the loan within 5 years, then the remaining balance of the borrowing costs are claimed in that year. Borrowing costs not exceeding $100 are fully tax deductible in the year in which they are paid.

To see an example of how it is calculated:
http://www.propertydivas.com.au/3TaxMang/NegGearing.aspx

Cheers,

AmandaBS
http://www.propertydivas.com.au
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