Spilt loans revisited

Has anybody had any experience with split loans?
I read recently that that there has been a new ruling following reinterpretation of ATO regulatons on compounding interest. From memory the Hart's case was disallowed as it was viewed as tax avoidance - they were using the Austral Mortgage Wealth optomiser product to direct all interest payments from their income producing loans (i.e. investment property) to be directed into their home loan and left the interest on their inv. property to capitalise, thereby rapidly reducing their non-deductible debt.
Apparently this new ruling in October this year allows the split loan as long as the criteria is adhered to. I looked at the Austral website and they are happily promoting their product again.
I'm not sure if the ATO will be appealing again and we may get into a perpetual cycle of appeals which creates lack of certainty for consumer.
Has anybody had experience of this product and is it only Austarl that promotes this type of loan?

 

Hi Scotty
There are many variations to split loans that could be potentially used to your advantage. It would not have to be with a particular lender. it could be a combination of 2-3 and by capitalising the interest.

The ATO did release a ruling in Oct however my understanding is that this has now been withdrawn

NickM

 

Scotty,

Yes, the ATO has withdrawn the ruling. I have discussed why with them and in short you are never going to get a deduction for capitalised interest if your dominant purposes is a tax advantage. While ever lenders advertise the tax advantage the ATO will argue that was your dominant purposes for entering into the loan agreement. My Newsflash 138 available on our website bantacs.com.au under free publications gives more detail of my discussions with the ATO and my claimable loans booklet in the booklets section of free publications discusses in detail when capitalised interest is not done with a dominant purpose of a tax benefit.

Julia
bantacs.com.au

 

split loans

Thanks for reply Nick and apologies for my tardiness in thanking you too. I have been busy......blah,blah.

Looks like ATO will make it as difficult as possible to dissuade us from even thinking about it. Do you think getting a private ruling is the way to go - then we cann get some certainty and it is binding.

Thanks again.

Scotty

 

split loans

Thanks for your reply Julia. Sorry for the delay in thanking you. I read your newsflash and came to the conclusion you probably cannot trust the feasability of deductions without a private ruling. Assuming everything fulfils the ATO's criteria and you pretend you're not interested in the attraction of tax deductibility then all should be well. Is that your read too?

 

Hi Scotty

yes a private ruling will give you certainty.

If you plan on applying for one, just make sure you cover all aspects of your situation

Cheers
NIckm

 

Scotty,

A really is a good idea. Please let us know what they say.

Julia
Ban Tacs Accountants - Rental Properties, Tax, Capital Gains, Fringe Benefit