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TD 2012 /1 - Interest deduction on investment loan Payment Arrangement

Discussion in 'Accounting, Tax & Legal' started by NickM, 30th Mar, 2012.

  1. NickM

    NickM Co-founder Staff Member

    Joined:
    20th Jun, 2005
    Posts:
    321
    Location:
    Sydney
    Not a nice ruling - see attached

    we are conducting further investigation but it is a major problem for many investors.

    I will post more info in due course

    NIckM
     

    Attached Files:

  2. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    NickM,
    I agree it may catch many out who have taken advice based on using this debt recycling strategy for the purpose to pay off your own home loan off earlier than you would otherwise do so and/or the purpose is to obtain a greater tax deduction.

    I expect this to be challenged in court in due course but it may come down to the prime or dominant purpose of why you are using this strategy.

    If the prime purpose is to direct rental income into an offset (that just happens to be associated to a home loan) for the purpose to build funds so you can borrow again for another investment property (or asset) and use the offset to fund the settlement, then this determination may not apply.

    It will also be interesting to see if the LOC facility used is associated to an IP rather than a PPOR, whether this determination applies.

    I am not a tax accountant, nor should this be seen as providing advice, more a general comment to consider.

    Greg