Hi guys, I am sure that this must have been discussed here before. I am wondering what kind of investments types are accepted by the ATO when it comes to making interest on a loan deductible? I got some extra cash that I can't use as a deposit yet but I don't like it sitting there and doing nothing. What are the options? thanks tomas
Confusing. Cash where? and why would using it result in interest payable that might or might not be deductible?
I have refinanced and got some equity out. It's a split loan so one part is against the IP and another part is doing nothing for now. So I would want to use the extra money for some sort of investment so that I could make the other split a "good" debt. thanks tomas
The investment must be expected to produce income for loan expenses to be deductible. It doesnt matter if it also produces a gain or growth. The income is important. Buying shares that dont expect to pay a dividend means no deduction is allowed. The interest may be a element of the costbase to reduce a CGT profit. eg CBA shares pay a dividend. Interest is deductible. VAS ETF pays income distributions. Interest deductible. Afterpay (APT) has never paid a dividend and none is expected. Not deductible. If that changes then it would likely be deductible interst from that time onwards for any NEW acquistions not the existing ones!! If your portfolio is a blend of non-income and income it may be very difficult to calculate the non-deductible element. This is why margin loans have a restricted approved product list. They all produce income !!
Thanks Paul, So if I'd opened a new trading account and would then use the money from the other split to buy Dividend paying stock(s) OR dividend paying ETFs or LICs then that should make the interest deductible? So if you'd find something that would pay dividends that would cover the interests...you would be break even and the growth if it happens would be then subject to CG but this way the money would do at least something for you instead of just sitting there... At least that's how I understand it.... interesting... Thank you It would be really interesting to see some of the setups of people who know how **** works and what can be done to avoid taxes....
Interest could be deductible if you had not broken the nexus with borrowing or mingled the borrowed money with cash.
So if I have setup the Loan "incorrectly" by having a separate account with an offset account and having the money in the offset account instead in the Loan account (redraw) .. have I broken the nexus? If I move the money back into the loan before I invest in anyway and pay for the investment from the loan account am I able to rectify my mistake? OR is the only way to rectify it by refinancing and setting up the loans differently? thanks tomas
