Tax deductibility of interest payments

Discussion in 'Loans & Mortgage Brokers' started by Mgs4, 14th Jul, 2015.

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  1. Mgs4

    Mgs4 Active Member

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    All,

    I know the definition of tax deductibility for interest payments is if the funds are used for an income generating asset. How does that work over time? Eg lets say you borrow funds against your house, interest only, to purchase dividend paying shares then after a period of time you use those funds for other purposes eg lifestyle expenses, deposit on PPOR etc. how does the tax deductibility change or not over time?

    Appreciate any feedback.
     
    Mgs4, 14th Jul, 2015
    #1
  2. DanW

    DanW Well-Known Member

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    When you sell the asset (shares), you have to pay the debt that acquired the asset. Otherwise the tax man will wave his little finger at you.
     
    DanW, 14th Jul, 2015
    #2
  3. Mgs4

    Mgs4 Active Member

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    You wouldn't necessarily need to repay the debt, I mentioned above assuming the loan was interest only, if there was an offset account you could temporarily put funds in the offset account.
     
    Mgs4, 14th Jul, 2015
    #3
  4. Terry_w

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

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    If you sell the shares the connection between the income and the expense is lost and you could no longer claim the interest.
     
    Terry_w, 14th Jul, 2015
    #4