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Interest Deductibility Question

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

  1. Rino

    Rino Member

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    4th Feb, 2008
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    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?
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Rino,

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

    Cheers,

    Dan
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    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.
     
  4. Saskatoon

    Saskatoon Well-Known Member

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    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.
     
  5. Rob G.

    Rob G. Well-Known Member

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    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
     
  6. Billv

    Billv Getting there

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    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