Join our investing community

Tax Deductibility of Interest

Discussion in 'Shares' started by Stevenk, 13th Jun, 2009.

  1. Stevenk

    Stevenk New Member

    Joined:
    13th Jun, 2009
    Posts:
    3
    Location:
    Warrnambool, VIC
    I have an interest only investment loan of $90K with the funds having been used to put into a margin loan to buy income producing shares. I claim tax deduction for the interest on this loan (approx $400/month). I pay $400/month into the investment loan each month so that the loan remains at $90K.

    The $400/month paid into the investment loan comes from the redraw facility on my home loan. The $400/month is effectively new borrowings. My question is, can I claim a tax deduction for the interest charged on the new borrowings of $400/month in my home loan account.

    I'm thinking yes, because if the $400/month was capitalised on the investment loan then I would be able to claim the compound interest.

    Hoping someone can help. Cheers.
     
  2. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Steven
    I am not an accountant but from what I know you can claim the interest on the $400
     
  3. Stevenk

    Stevenk New Member

    Joined:
    13th Jun, 2009
    Posts:
    3
    Location:
    Warrnambool, VIC
    Thanks Bill, In hindsight I should have looked into setting the investment loan up so the interest could be capitalised to the account. That way everything is kept separate from the loan on my PPOR.
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    You can still do that or you can continue to do the same and apportion the monthly interest.

    If you decide to get a separate loan, check out the interest rate because investment loans have a higher interest rate than your home loan.

    I think a LOC is a better option.

    Some banks will allow you to redraw a certain amount from your home equity and to put it in a line of credit which can be drawn as required.