Margin Loan vs Home Loan

Hi,

I have $60k owing on my home loan and I have an existing Margin Loan worth $280K. If I sell down $70k and use the $60k to pay out my home loan (as it's non-deductible debt), then borrow $60k against my home (using that as equity) and start a new M/L (deductible debt) would this be considered a 'tax dodge', as my net position is still the same (I think). Can anyone advise if this is a legal tax strategy? Or would the ATO look at it as tax evasion anyway due to the net position being the same, I just pay less tax?

 

Deductibility is determined by the purpose for which funds are used, not what they are secured against. Also if you refinance a loan with another then the original purpose remains.

So in your example if you draw down on your margin loan to pay off your home loan, the interest on the margin loan will not be tax deductible (as it is simply refinancing a non deductible debt).

You could look at getting another loan account/split secured against your PPOR to pay down your margin loan - reducing the interest rate you are paying and reducing chances of margin calls.

Regards,

Jason

Regards,

Jason