Negative gearing

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(Newbie)Newbie

26 Mar 2025

Hi there,

My question is are you able able to claim negative gearing on an investment property in the following scenario;

Property purchased 2 year ago as a owner occupier property with the help of a loan from a family member. There is a formal loan agreement in place with repayments & interest payable
6 months ago the property was leased out so it is now earning income & is classified an investment property

If there is evidence of the formal loan agreement & also the parent is able to provide documentation of interest paid can this be used for negative gearing purposes? AND,
If the parents loan was refinanced to a regular bank. ie Pay out the parent loan with a mortgage from XYZ Bank will this new loan & interest payments be eligible for negative gearing purposes?

Thanks

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(Taxicorn)Taxicorn

26 Mar 2025

Not sure on this, but if it's a private loan, I think it would need to have interest rate that's at arm's length (reasonable). (Similar situation is when director borrowing from a company they control). Your parents should be declaring the interest income. And having the agreement and a showing of interest being paid would be good evidence.
As long as the refinanced amount is the same as the original loan, it should be okay. ATO would accept that purpose of the loan is the same. Can read ruling, TR 2000/2 paragraph 18.

Most helpful reply

(Taxicorn)Taxicorn

26 Mar 2025

Not sure on this, but if it's a private loan, I think it would need to have interest rate that's at arm's length (reasonable). (Similar situation is when director borrowing from a company they control). Your parents should be declaring the interest income. And having the agreement and a showing of interest being paid would be good evidence.
As long as the refinanced amount is the same as the original loan, it should be okay. ATO would accept that purpose of the loan is the same. Can read ruling, TR 2000/2 paragraph 18.

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