diff --git a/src/tex2lyx/preamble.cpp b/src/tex2lyx/preamble.cpp
index 8de4f3b715..df9462dbe9 100644
--- a/src/tex2lyx/preamble.cpp
+++ b/src/tex2lyx/preamble.cpp
@@ -48,6 +48,7 @@ const char * const modules_placeholder = "\001modules\001";
 
 // needed to handle encodings with babel
 bool one_language = true;
+string h_inputencoding = "auto";
 
 namespace {
 
@@ -165,7 +166,6 @@ string h_textclass               = "article";
 string h_use_default_options     = "false";
 string h_options;
 string h_language                = "english";
-string h_inputencoding           = "auto";
 string h_font_roman              = "default";
 string h_font_sans               = "default";
 string h_font_typewriter         = "default";
@@ -517,7 +517,7 @@ void handle_package(Parser &p, string const & name, string const & opts,
 	else if (name == "fontenc")
 		 ;// ignore this
 
-	else if (name == "inputenc") {
+	else if (name == "inputenc" || name == "luainputenc") {
 		// h_inputencoding is only set when there is not more than one
 		// inputenc option because otherwise h_inputencoding must be
 		// set to "auto" (the default encoding of the document language)
diff --git a/src/tex2lyx/tex2lyx.cpp b/src/tex2lyx/tex2lyx.cpp
index 958e4a7eb3..8d5e858885 100644
--- a/src/tex2lyx/tex2lyx.cpp
+++ b/src/tex2lyx/tex2lyx.cpp
@@ -624,11 +624,22 @@ namespace {
  *  You must ensure that \p parentFilePath is properly set before calling
  *  this function!
  */
-void tex2lyx(idocstream & is, ostream & os, string const & encoding)
+void tex2lyx(idocstream & is, ostream & os, string encoding)
 {
+	// Set a sensible default encoding.
+	// This is used until an encoding command is found.
+	// For child documents use the encoding of the master, else latin1,
+	// since latin1 does not cause an iconv error if the actual encoding
+	// is different (bug 7509).
+	if (encoding.empty()) {
+		if (h_inputencoding == "auto")
+			encoding = "latin1";
+		else
+			encoding = h_inputencoding;
+	}
+
 	Parser p(is);
-	if (!encoding.empty())
-		p.setEncoding(encoding);
+	p.setEncoding(encoding);
 	//p.dump();
 
 	ostringstream ps;
diff --git a/src/tex2lyx/tex2lyx.h b/src/tex2lyx/tex2lyx.h
index 6a3057f188..f2bde2e8cb 100644
--- a/src/tex2lyx/tex2lyx.h
+++ b/src/tex2lyx/tex2lyx.h
@@ -52,6 +52,7 @@ extern std::string babel2lyx(std::string const & language);
 /// used packages with options
 extern std::map<std::string, std::vector<std::string> > used_packages;
 extern const char * const modules_placeholder;
+extern std::string h_inputencoding;
 
 /// in text.cpp
 std::string translate_len(std::string const &);