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Re: Tax claim expenses

Newbie

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Hello,

 

I converted my Principle Place of Residence to an Investment property recently. I had purchased the property in 2010 and living there till 2019 and moved out to my new house, after renting the old house.

 

My expenses and loan amount in 2010 as below.

 

Purchase Price 425,000

Lenders Insurance 25,000

Loan Amount 350,000

Loan top of 100,000 on 2019 to deposit for new home

The market valuation of the property in 2019 is 650,000

 

Interest Paid from 2010 to 2020

 

Can I claim Interest and Lenders Insurance on my 2020 tax return? If so, on what proportions?

 

Thanks

 

 

 

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Most helpful response

ATO Community Support

Replies 2

Hi @Maxma

 

You can claim interest on your loan in the year its incurred, for the periods your home was rented or genuinely available for rent. You can't claim interest for portions of the loan that were for private purposes. For example if you refinance and use a portion to go towards a new home. You can only claim interest expenses to the extent that it relates to producing rental income.

 

You can also claim a deduction for Lenders mortgage insurance. This is a borrowing expense and the deduction is spread across a number of years.

 

See Rental expenses you can claim now and Borrowing expenses.

 

Hope this helps.

 

Ari

 

 

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

Hi @Maxma

 

You can claim interest on your loan in the year its incurred, for the periods your home was rented or genuinely available for rent. You can't claim interest for portions of the loan that were for private purposes. For example if you refinance and use a portion to go towards a new home. You can only claim interest expenses to the extent that it relates to producing rental income.

 

You can also claim a deduction for Lenders mortgage insurance. This is a borrowing expense and the deduction is spread across a number of years.

 

See Rental expenses you can claim now and Borrowing expenses.

 

Hope this helps.

 

Ari

 

 

Newbie

Replies 1

Hi Ari

Thanks for your reply.

I got your comment on the interest claim. But still, I am not sure how the LMI which was incurred in past (for my case it's around 10 years back) applicable once the property becomes an Investment? You said "over a few years" How many years?

 

Thanks

ATO Community Support

Replies 0

Hi @Maxma,

 

This is relevant to the loan balance on your original property when it was first used to produce income. You can claim deductions for interest expenses for the rental. The 100k portion used to purchase your 2nd property is not deductible, you will need to apportion the interest expenses accordingly.

 

Speak with your loan provider to determine LMI balance when it was first rented out. The website advises - If your total borrowing expenses are more than $100, the deduction is spread over five years or the term of the loan, whichever is shorter.

 

Bear in mind when claiming interest expenses, if the LMI is included in your loan repayments, you will need to apportion these amounts when claiming interest and LMI separately. 

 

Links -

Borrowing expenses.

 

All the best.