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

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

 

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