OK this might seem like an idiotic question…but I am very very new to this and just want to think outside the box a bit.
I want to buy an IP in USA, however there is no finance available to my knowledge yet as I am looking at IP under $100k.
I have the money, however, a chunk of it is in a managed fund which has performed poorly since GFC, hence I would really prefer to wait till that unit price increases as at the moment I have been getting a lot of units (automatic monthly savings) and the potential for CG there is good.
So,
Is there some way that I can set up a loan from my parents paying them interest and use those repayments (P+I) as a deduction for the IP overseas? I mean there is no point in me having a loan and paying interest on it if it is not going to be a deduction, right? And unfortunately my parents would not be in a position to just give me the money.
Any help would be greatly appreciated.
Cheers
Yes.
You just to a written loan agreement with mum and dad. Work out the terms of the agreement such as term, interest rate, security (if any) etc
They can charge you interest and you can claim the interest, subject to all the normal tax rules. They would pay tax on the interest you pay them, but if they are borrowing from a LOC they could claim the interest they are paying the bank.
Watch out for Centrelink implications.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terryw,
No one in my family has ever had Centrelink so I doubt that will affect me/us?
Yeah you pretty much sussed out what I was thinking there with the LOC as they don’t have it handy.
Do you have any idea how this would work though? Claim the Oz loan directly on the US property? Claim the loans here in Oz as a deduction? Shady waters if done incorrectly.
Also where or how would you set this kinda stuff up?
Cheers
You would need to see your tax advisor, although the average accountant may not know much about internation tax so you probably will need more specialist advice. Your advisor can probably help you set up the written loan agreement – although they couldn't draft a legal document unless they are a lawyer.
I imagine you would be able to claim the interest on the loan against your US income and will also have to declare this income and expenses in Australia with a credit for any tax paid over there.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi,
1. Is your parents just going to borrow the money as it is ? ie a personal loan OR
2. Borrow against any property they owned as equity? ie a home loanFor them to be able to claim the tax deduction they need to meet the purpose test; and if the purposes is for “investment” then yes that’s fine…but in your case i would say it would be “hardier” to prove it’s for investment as the money is given to a related family member and no “official ” paper trail can be issued etc…
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Shape, I would imagine it would be the 2nd option as cash isn’t easily available to them (all tied up in a negatively geared property). Basically I don’t want to do it unless they can claim it as a tax deduction or get something out of it. How to make a paper trial? There has to be some way around this. Looks like I’ve got a lot of reading to do…..
Thanks again Terryw. At the end of the day I’ll need to go to a professional but I guess I just wanted to see if my lateral thinking was at all possible. Hmmmm.
Benny i think you are over complicating the matter.
If you parents borrow say $100,000 at 7% and then onlend the funds to you at the same rate they merely offset the 2 amounts.
All they would have to do is do up a fairly simple Loan Agreement and you sign it.
You may even be able to download a free Loan Agreement between family members. Do a quick Goolge search and see what comes up.I am away on holiday at the moment or would do it for you.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Beautiful.
Thanks Qlds007/Richard. I’ve found some real easy stuff online. Cheers!!
Your right I do believe I was complicating matters. Now I just need to find out whether I can claim the interest for an overseas property investment or not. And if so where I can claim it. OS tax return or AUS tax return…..
Hope your having a good holiday!!
Thanks,
Ben
Hi Ben
Hamilton Island is a wonderful place so can never complain.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Hi BenHamilton Island is a wonderful place so can never complain.
Cheers
Yours in Finance
Yep sure is. If you're into golf, the course on Dent Island is pretty awesome. Even just popping over for lunch in the golf club is a nice way to spend an arvo.
Enjoy
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie i agree Peter Thompson knew how to design a course
Cheers
Yours in Finance.
Richard Taylor | Australia's leading private lender
Was looking into a family loan agreement and came across this post so might add to it…… It seems fairly similar to my scenario but I think mine may be even easier?
My wife loaned me the deposit for an IP earlier in the year – property is in my name. It is now coming to tax time and I would like to claim this as a deduction – ie draw up some sort of family loan agreement and charge interest/charges etc. Is there any problem in this in that we are husband/wife? Or is it relatively simple if we have an agreement, I claim the deduction but she has to declare the income as 'interest' (she doesnt need ABN for this does she as it would be classed as normal bank type interest).
Thanks in advance…
ritchie
The ATO may not even require a loan agreement between spouses. She incurs the interest, but you claim it. yo could go and draw up a loan agreement though.
Jsut check with your accountant.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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