If you can answer any of the questions below that would be much appreciated. Thank you in advance.
I am thinking of borrowing money from my aunty, who is willing to lend me the money to buy an investment property for a very low interest rate. She is not a resident of Australia, therefore does not have to fill out the tax return. But she does have a bank account here, where she pays 10% of her interest.
What I want to know is:
Can I still claim that interest on the borrowing on my Tax Return? What documents will I need to proof that I have borrowed money? Do I need some formal documents?
Cheeseman
March 31, 2010 at 9:18 am
If you are referring to claiming a deduction for the interest expense that you have incurred. This would depend on the purpose that you have borrowed the money for. If it it used to gain or produce assessable income (s 8-1 ITAA1997) then you may be able to claim a deduction.
However if it is for personal use, you cannot deduct it.
Yes, you do need formal documentation, I believe that a formal loan agreement would be required, plus financial transaction documentation for security and completeness.