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Funds: First in - First out question?

Discussion in 'Accounting, Tax & Legal' started by gad, 4th May, 2007.

  1. gad

    gad Well-Known Member

    Joined:
    5th Sep, 2005
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    Canberra
    G'day Guys,

    I'm just trying to work this out & hope you can help:

    As far as tax office & investments are concerned, first money in is first money out, right.

    Just for simplicity

    Nov04 - $250k investment loan + $250k margin loan. Bought into Navra Aust. Retail fund. (All distributions reinvested, other applications made since ect)
    Nov06 - $100k addition to margin loan. Bought $100k Navra American fund.
    (All distributions reinvested)

    All margin loan interest is being capitalised.

    Jun07 - I want to sell off the American fund for deposit & costs on next IP so I sell fund, margin loan is then reduced by that amount (lets say $105k). Small Cap. Gains tax triggered.

    I then draw down that $105k from Margin lender.

    Using that $105k for deposit on next IP, would that $105k be deemed to have been the original (first) $105k invested in the Aust. fund?

    (As that original investment was from an investment loan I would then apportion that amount against the new IP for tax purposes, would that be right?)

    Thanks.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Why do you need to apportion it ? It's all investment borrowings isn't it ?

    Or are you buying different assets in different names ?
     
  3. gad

    gad Well-Known Member

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    Yes, that's about it Sim.

    The original PPOR loan was drawn down on for the deposit & costs of another IP. When the loan was refinanced to 80% LVR with another lender 10% of the interest was claimable against that IP, the other 90% was invested into the Navra fund in my wife’s name making the interest on that 90% claimable against the fund in my wife’s tax return.
    Now if I draw down $150k from the fund for deposit & costs of another IP in my name, the interest on that portion would now be claimable against that IP in my tax return. The loan is in both names.
     
  4. NickM

    NickM Co-founder Staff Member

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    Gad,
    The ATO will look at what you used the $105 for now.
    I think from your post ity will go toward a new IP hence the deduction will be fine
    NickM
     
  5. gad

    gad Well-Known Member

    Joined:
    5th Sep, 2005
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    Location:
    Canberra
    Thanks NickM

    Think I have it pretty well sussed out now.