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Capitalising interest question

Discussion in 'Managed Funds & Index Funds' started by talbashan, 6th Oct, 2005.

  1. talbashan

    talbashan Well-Known Member

    Joined:
    21st Sep, 2005
    Posts:
    58
    Hi everyone,
    I'm pretty new to all this and can't always get my head around some advice that is given to me.
    I currently have $300k invested in the Navra fund. This consistes of $150k from a LOC on my PPOR and $150 margin loan from LE. The distribution are being used to reduce my PPOR mortgage (not tax deductible). At this stage i've been told not to pay the interest on the margin loan part of my total borrowings and instead let it capitalise (I am paying the interest on the LOC from my salary).
    and now to my questions:
    1. What is the advantage of not paying the interest and letting it capitalise?
    2. At what point should i start paying it?

    Thanks in advance
    Tal
     
  2. Andrew

    Andrew Active Member

    Joined:
    16th Aug, 2005
    Posts:
    27
    Location:
    Moonee Ponds
    According to more knowledgable sources than myself, the interest on capitalised interest
    is deductable when not marketed as a tax evasion scheme. Assuming you get some
    capital growth your margin shouldn't be affected too much and you shift some debt
    from non-deductable to deductable.

    The benefits become apparent when you get a big cheque from the ATO.

    andy
     
  3. talbashan

    talbashan Well-Known Member

    Joined:
    21st Sep, 2005
    Posts:
    58
    thanks andy.. that makes sense. i'll ask my accountant and see what he says..
    cheers
    tal