Watch Implications In Tax Matters
Newcastle Herald
Monday August 28, 2000
WHEN arranging our financial affairs we often make decisions without fully understanding implications.
Borrowing to purchase assets and claiming the cost of the borrowing as a tax deduction is fairly common practice.
Lenders usually secure their loan by taking a mortgage over the asset being purchased or other property owned. If additional security is required the lender often take a mortgage over the family home.
For people on government income support payments or those who intend to apply for a pension or allowance it is important to understand how Centrelink will assess an asset where a loan exists for that asset.
Generally, if there is a loan against a particular asset the value Centrelink will use is the net value of the asset less the outstanding loan to determine its value under the social security means test.
However, if the loan obtained to purchase an asset was secured against the family home the value of the outstanding loan cannot be deducted from the value of assessable assets. This is very important and recipients of government income support payments should ensure they are not disadvantaged by the way a lender secures a loan.
The assessment under the income test differs depending on the type of asset acquired. If the asset was real estate the interest costs can be deducted from the rental income assessed from the investment. If the asset is a financial asset no allowance is made for the interest charged.
THE National Information Centre on Retirement Investments Inc (NICRI) is a government funded, independent consumer agency providing informationto the general public on investment products.
© 2000 Newcastle Herald
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