Debt recycling - share trading account

Discussion in 'Accounting & Tax' started by cooleymick, 23rd Jul, 2019.

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  1. cooleymick

    cooleymick New Member

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    Hi all,

    Appreciate opinions as to the deductibility of interest under the following DR scenario:
    - Create split from ppor loan, deposit cash into split, redraw cash for investment purposes
    - deposit redraw funds into share trading broker account
    - actively trade share ETFs (>100 trades per year), with the view to increasing portfolio value
    - realised gains for the trades are effectively treated as capital gains across the year
    - ETFs are generally not held long enough to be income producing, however some trades depending on timing may result in a ETF dividend
    - a mixture of cash and ETFs is held in the broker account as positions are opened/closed

    Would the interest from the investment loan (generated from the ppor split) be deductible on the basis it is an expense of generating capital gains within the share trading portfolio?

    Thanks in advance.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    share trading is generally not on capital account.
    Deductibility needs income for the interest to be deductible. So it depends.
     
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  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yep in the trading situation described I would agree about the revenue nature BUT depends on frequency etc. The interest should be deductible against the revenue if its not on capital account. Non-commercial loss tests may impact whether its capable of offsetting salary and other income if there is a loss. Seek advice.
     
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  4. cooleymick

    cooleymick New Member

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    Thanks for the replies gents
     
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