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Margin Loan and SPPs

Discussion in 'Accounting, Tax & Legal' started by Fruitloop, 17th Jun, 2009.

  1. Fruitloop

    Fruitloop New Member

    Joined:
    17th Jun, 2009
    Posts:
    3
    Location:
    Sydney, NSW
    Hi,

    I have a question relating to drawing from a margin loan to purchase under a SPP. The margin loan does not hold the securities offering the SPP but the account name is the same for both cases.

    Am I correct in assuming that does not matter? Becuase I am drawing out money (backed up by security in the form of shares) for the direct intent of purchasing shares that (at least presently) pay a return (dividend), the interest on that loan is tax deductable.

    Thanks.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    So if I understand you correctly, you have an existing share portfolio with a margin loan. You then withdraw cash from the margin account (using equity in the share portfolio) and use this cash to buy other shares which are not purchased on margin (just a cash transaction).

    In general the interest on the additional borrowing should be tax deductible - it is the purpose which determines the deductibility, and you are using the borrowed funds to buy an investment asset, so there should be no problems. Note that I am not an accountant or tax expert - seek professional advice if necessary.
     
  3. Fruitloop

    Fruitloop New Member

    Joined:
    17th Jun, 2009
    Posts:
    3
    Location:
    Sydney, NSW
    That pretty much confirms what I thought - thanks.