Interest Deductibility Question

Discussion in 'Accounting & Tax' started by Rino, 6th Mar, 2008.

Join Australia's most dynamic and respected property investment community
  1. Rino

    Rino Member

    Joined:
    1st Jul, 2015
    Posts:
    7
    Location:
    Sydney, NSW
    I have a $200k margin loan. I want to get rid of the margin loan and fund my share portfolio using a LOC on my PPOR.

    If I draw down $200k from my LOC and use it to pay off the margin loan, is the interest on the LOC deductible? Or do I need to sell everything in the margin loan, then re-buy it using the LOC funds?
     
    Rino, 6th Mar, 2008
    #1
  2. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    1,075
    Location:
    Sydney, NSW
    Hi Rino,

    I'd suggest speak to your tax adviser, accountant or financial planner.

    Cheers,

    Dan
     
    AsxBroker, 6th Mar, 2008
    #2
  3. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    As far as I'm concerned, you are just "refinancing" your debt ... no different to changing lenders with an investment property - you end up with a new loan, and it is still tax deductible (in general - there are some circumstances where you might mess things up a bit).

    I think you'd be fine - but of course, double check with your tax advisor.
     
    Simon Hampel, 6th Mar, 2008
    #3
  4. Saskatoon

    Saskatoon Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    66
    Location:
    Adelaide
    Rino, I agree with Sim' (as usual!): just watch that there is no blending of deductible and non-deductible debt in the same LOC. Draw down the $200K in it's own sub-account to avoid book-keeping complications.
     
    Saskatoon, 8th Mar, 2008
    #4
  5. Rob G

    Rob G Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    966
    Location:
    Melbourne
    No probs.

    TR 2000/2

    Just remember that the Commissioner usually regards a "rollover" LOC as refinanced every month.

    Therefore if you sell some shares, & don't pay down the loan with the proceeds OR use the funds for some income producing purpose (e.g. replacement assets) then it might become a mixed purpose loan if those proceeds are used for private purposes.

    This is so even if 100% of the original borrowing was to derive income.

    Look to the use of the money .... while it is all used for income purposes then all is OK.

    Cheers,

    Rob
     
    Rob G, 8th Mar, 2008
    #5
  6. BillV

    BillV Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,555
    Location:
    Sydney
    I don't see a problem with doing that.
    Just keep all receipts and ensure you have a good paper trail.
    No, you wouldn't need to sell.
    Cheers
     
    BillV, 8th Mar, 2008
    #6
Financial Advice – Do you need help