Investor loan break costs

Hopefully an easy one..

I know if you break a fixed rate early on a loan purposes for investment you can deduct that expense fir tax in the FY incurred.

If however you instead roll that cost into a refinance of your existing investment loan, my question is would the additional borrowings remain treated as an investment loan (with interest deductible for tax) or not?

Hope my question is clear. Thanks

 

Harts case shows that interest on interest is deductible if the underlying interest is deductible, but the ATO could deny the deduction if a scheme.
Break costs are just loan fees and can be borrowed for and interest can be deductible. Nearly everyone refinancing would be borrowing to pay the mortgage discharge fee which is similar. I don't see an issue with it, but just get your own tax advice.

 

Thanks, that's great. Logically, I couldn't see the difference in substance between paying the investor loan break costs upfront (which is deductible according to my tax advisor) or using finance to do so

 

Import to consider the timing of a break cost. If a property is tenanted and fixed rate is broken while tenanted then its likely deductible in full even where the property may have been a home prior to the tenancy period when the fixed rate loan was set. If the tenant moves out and then its broken it wont be deductible. We see this with sale of IPs where lender breaks costs on sale settlement. This isnt deductible and loses 50% of its value as a CGT cost in place of being a deductible outgoing incurred to produce rental income.