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Deductibility of interest on loan from spouse to purchase a property

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If my spouse lends me the money to purchase an investment property, am I allowed to claim the interest I pay to her as a tax deduction? I am prepared to register her as the mortgagee  if required.

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Devotee

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How could you prove the money was just your spouse’s and not joint funds?  I think it could look like you are lending yourself money to enable an interest deduction which is not arms length. I would imagine the investment property would be just in your name, so consider the CGT implication would be just yours as well. 

 

I would be hesitant to do this arrangement without a private ruling or specialist tax advice from a professional. 

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Devotee

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If you deal with each other at arm's length - then yes. Note that if this is the case, whilst the interest you pay is a deduction to you, it will be assessable income to her.

 

 

Most helpful response

Devotee

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How could you prove the money was just your spouse’s and not joint funds?  I think it could look like you are lending yourself money to enable an interest deduction which is not arms length. I would imagine the investment property would be just in your name, so consider the CGT implication would be just yours as well. 

 

I would be hesitant to do this arrangement without a private ruling or specialist tax advice from a professional.