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Apportioning Interest Deduction for Part-Year

Discussion in 'Accounting, Tax & Legal' started by Redman, 20th Jul, 2010.

  1. Redman

    Redman Member

    Joined:
    23rd Jul, 2009
    Posts:
    13
    Location:
    Adelaide, SA
    Hi All,

    Hopefully someone can give me a valid suggestion.

    I'm after a reasonable basis or way to apportion the interest charged from a loan on a property that I lived in for about 7 months in FY09/10, then rented for the rest.

    I know I can claim a deduction for the interest I was charged over the 5-month period that the place was rented for, but am not sure of a reasonable way to calculate it. I have the total interest charged for the year figure ($11,506), but obviously interest rates have changed a lot over the last year, so I can't just split this 7/5. My statements show monthly interest payments (IO loan), but dont show exactly what period they cover (ie dates), and it shows when rate rises occurred, but not what the actual rates were (or I could calculate it in excel).

    What would be a reasonable way to apportion the interest - how would accountants normally do this? We are doing our own tax.

    Thanks for the help!!

    Cheers,
    Redman.
     
  2. PJCA

    PJCA Member

    Joined:
    30th Oct, 2009
    Posts:
    18
    Location:
    Adelaide
    Generally interest will be debited on statements up to the period it relates. Obviously with the detail provided it is not possible to state with any certainty - however if for example interest is debited on the 20th each month then I don't think you could go too far wrong to base your calcs that interest represents the previous month ended 20th. Pro-rata from there.
    I'm an accountant in Adelaide, if you're after any help in the future more than happy to see you.

    Thanks
     
  3. Redman

    Redman Member

    Joined:
    23rd Jul, 2009
    Posts:
    13
    Location:
    Adelaide, SA
    Thanks PJCA,

    Yeah, I've confirmed with other accountants and they suggest similar - basically saying to make fair and reasonable judgements about how I worked it out, document it well, and the worst that may happen is I have to pay the difference with no penalty if it ever comes to that.

    I'm happy with that - I can calculate it pretty close.
    Cheers!