Hi,
I have a question about a very specific situation relating to a private loan from parents.
Last year we bought an Investment property and before we started buying the property we asked my parents to help fund it if we couldnt get enough loan. In the end, things worked out ok as we got the loan for full amount that we wanted, however my parents gave us the money regardless to help reduce the interest on the property, with an expectation that they will be paid back the bank interest they will lose during the period.
So the situation is, we took the money from our parents (a significant enough amount) and have kept it in the offset account of the Investment property to help reduce the interest on the investment property. At the end of the financial year we are required to pay my parents the interest that they should have earned for the period. Interest to be calculated at 5% annual rate, which was the rate they were getting through their bank.
My question is, as this is related to an investment property, what do I need to do to claim this interest which I assume would be considred a private loan interest? Do I need any paperwork or would transactions to prove loan from them and a payment of interest be enough?
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