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Investment Loan and Tax Deductions

Discussion in 'Accounting, Tax & Legal' started by Lesa, 4th Jun, 2009.

  1. Lesa

    Lesa New Member

    4th Jun, 2009
    Hi there

    I currently have a split loan facility that includes a home loan and a investment loan.

    The investment loan is interest only.

    We have used funds from the investment loan to buy shares which are managed in a Macquarie account.

    I recently withdrew funds from the Macquarie account (to my personal bank account) being profit from our investment, and was just wondering if I need to show this transaction in my investment loan account?

    I am not sure if this is deemed to reduce my loan amount or not?


  2. Superman

    Superman Well-Known Member

    6th Nov, 2007
    Gold Coast, QLD
    It depends.

    There still must be a connection between the interest deduction and the earnings made on the investments.

    Assuming you only took some of the profits as cash it should be OK becuase effectively you have already paid tax on this money (i.e. your taxable income will be adjusted by income earned on investments less interest on loan [+ or -]).

    I you have eaten into your capital of the original investment the loan was for you should make an adjustment and claim less interest moving forward as the purpose of the funds has changed from producing income/capital growth (deductible) to personal (non-deductible).

    Does that answer your question? It is the best I can give off the top of my head based on the information you supplied.

  3. Rob G.

    Rob G. Well-Known Member

    6th Jun, 2007
    Melbourne, VIC
    You will need to spell it out more specifically.

    Read TR 2000/2 and it will make your head spin.

    I have three questions ...

    1) Were the "profits" actually proceeds of share sales ?

    2) Were the "profits" paid into the investment account ?

    3) Did you withdraw ANY money from the investment account and place in your personal account.


  4. GregR

    GregR Well-Known Member

    13th Jul, 2009
    Berwick Vic
    Investment loan & Profit

    If I understand you correctly, your Macquarie account (as separate from your 2 loan accounts) has funds in it resulting from profits made on share trades and you took some of the profits and put it back into your personal bank account.
    There is no requirement to put profits (or dividends or rental income) back into an investment loan to reduce the loan. A strategy many astute investors use is to direct profits (and other income) back into offset accounts linked to their home loan or direct into their home loan (with a redraw facility) to reduce non-deductible debt rather than reducing the investment loan (interest which is tax deductible). It is a more effective strategy than reducing investment loans. It depends on your own circumstances and your approach to leverage and ability to use tax deductions.
    I hope this helps.