Section 7 (5) of the income tax excludes loans made by the trustee to the extend that the loan is used for the acquisition of a primary residence where they reside is the loan used limited to the acquisition price of the house ie. cost plus say transfer f
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
For section 7C to apply, an individual must be a connected person in relation to the trust. If the finance was obtained from a financier (or bank) – you refer to a bond – section 7C is unlikely to apply.
The relevant law is found in section 7C(5)(d) of the Income Tax Act. It requires that that trust used that loan wholly or partly for purposes of funding the acquisition of an asset and the natural person who provided the loan or the spouse of that person used that asset as a primary residence throughout the period during that year of assessment during which that trust or company held that asset.
The requirement in section 7C(5)(d) is that trust used the loan, advance or credit “wholly or partly for purposes of funding the acquisition of the asset” (the residence in this instance). Interest incurred on a loan would not be seen as expenditure relating to the cost of acquiring the property. It would also no meet “the amount owed relates to the part of that loan, advance or credit that funded the acquisition of that asset” part.