Is a tax return needed or desired for interest

Discussion in 'Accounting & Tax' started by gotta, 25th Aug, 2006.

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  1. gotta

    gotta Member

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    Hi all;

    My wife does not do paid work.

    we (she) lent money to a person for a development using a LOC.

    No money has been received by my wife in this last financial year but she will earn interest in this current fiancial year.

    Does she need to lodge a tax return for the 05/06 tax year?

    SHould she lodge a return listing the amount of interest, while not yet received, was earned in the 05/06 fiancial year.

    When she lodges a return next (this) fianancial year will she be entitled to claim all the interest paid on the LOC or only that part paid in the 06/07 finanical year?

    Thanks in advance for any advice.

    gotta
     
    gotta, 25th Aug, 2006
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    I'm not a tax expert ... but my understanding is that you only need to lodge a tax return if you have income over the tax-free threshold ($6000).

    See the ATO website more more info:
    What is a tax return?
    When do we pay taxes?

    In general I would have thought that you would include the interest in the tax year that it was actually received (ie 06/07) ... and similarly, you would only be able to claim any loan interest costs for the year in which they actually occurred.

    I think you need some good tax advice ... someone who can advise you on whether the interest costs from the LOC for the year in which there was no income would be deductible (I suspect it would be given that there is an intention to earn income - however, if there is no declarable income, or if the income is less than $6000, then there is nothing to offset that against, hence no deduction would be forthcoming anyway).
     
    Simon Hampel, 25th Aug, 2006
    #2
  3. gotta

    gotta Member

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    Tax on LOC

    thanks for that Sim, much appreciated.

    Seems like I should have let the interest accumulate and pay it out of the proceeds and then claim it all in the year in which the return was paid. Perhaps a LOC is not the best loan for this scenario though.

    cheers
     
    gotta, 29th Aug, 2006
    #3
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