Claiming Borrowing Expenses.
“We are all aware loan application processes are timely, and with anything that takes time, significant fees are going to be incurred (nothing comes for free these days!). Being aware of every pesky fee that the bank charges during this process and then claiming these costs in your tax return can result in a substantial reduction in the amount of tax you pay for up to 5 years.
During the loan application and settlement process, we suggest you make a conscious effort to maintain the loan contract documentation so when you come to us, we can note and claim these costs for you. It’s highly recommended that you don’t simply rely on the loan statement as the bank does put some borrowing costs in the settlement disbursement, so keep all these records handy for tax time. We’ll know what to do if we have all the documentation.” – Adam Pasquill, Senior Accountant @ Highview.
Learn more about how you can claim borrowing expenses…
Taken out a loan to buy a rental property? You may have incurred borrowing expenses to establish the loan, such as bank charges and legal costs.
How you claim depends on what you paid:
- If your borrowing expenses are more than $100, you claim the cost over five years.
- If your borrowing expenses are $100 or less, you can claim the full amount in the same income year you incurred the expense.
Borrowing expenses you can claim
You can claim the following as borrowing expenses:
- loan establishment fees
- lender’s mortgage insurance (insurance taken out by the lender and billed to you)
- title search fees charged by your lender
- costs for preparing and filing mortgage documents (including solicitors’ fees)
- mortgage broker fees
- fees for a valuation required for loan approval
You can’t claim any of the following as borrowing expenses:
- the amount you borrow for the property
- loan balances for the property
- interest expenses (these are claimed separately)
- repayments of principal against the loan balance
- stamp duty charged by your state or territory government on the transfer (purchase) of the property title (this is a capital expense)
- legal expenses including solicitors’ and conveyancers’ fees for the purchase of the property (this is a capital expense)
- stamp duty you incur when you acquire a leasehold interest in property such as an Australian Capital Territory 99-year crown lease (you may be able to claim this as a lease document expense)
- insurance premiums where, under the policy, your loan will be paid out in the event that you die, become disabled or unemployed (this is a private expense)
- borrowing expenses on any portion of the loan you use for private purposes (for example, money you use to buy a car).
For more information on borrowing expenses and what you need to report in your tax return you can visit the ATO website here, or chat to your Highview Accountant in your tax appointment this year.
Source: Australian Taxation Office