What borrowing expenses can property investors claim? This is what the ATO says.

Thank you for RealRenta Landlord Denise from Sydney, for this question.

The following is directly from the ATO website:



Borrowing expenses

You can claim a deduction for borrowing expenses associated with purchasing your property, such as loan establishment fees, title search fees, and costs of preparing and filing mortgage documents.

Interest on the loan is not a borrowing expense, and can be claimed immediately.

If your total borrowing expenses are more than $100, the deduction is spread over five years or the term of the loan, whichever is less.

If the total borrowing expenses are $100 or less, you can claim a full deduction in the income year they are incurred.


What can you claim?

You can claim all of the following as borrowing expenses:

-stamp duty charged on the mortgage

- loan establishment fees

-title search fees charged by your lender

- costs (including solicitors' fees) for preparing and filing mortgage documents

- mortgage broker fees

-fees for a valuation required for loan approval

- lender's mortgage insurance, which is insurance taken out by the lender and billed to you.


What are you unable to claim?

You cannot claim any of the following as borrowing expenses:

- loan balances for the property

-stamp duty charged by your state or territory government on the transfer (purchase) of the property title

- legal expenses including solicitors' fees for the purchase of the property (these are capital expenses)

- 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 invest in a super fund).


Stamp duty and legal expenses may be included in calculating the 'cost base' of the property for capital gains tax (CGT) purposes as they are capital expenses.

If you repay the loan early and in less than five years, you can claim a deduction for the balance of the borrowing expenses in the year of repayment.

If you obtained the loan part way through the income year, the deduction for the first year will be apportioned according to the number of days in the year you had the loan.

Jason Gwerder
Tuesday, 27 November 2018

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