Some people imagine they can borrow to buy shares (or property), claim the interest, and then sell the shares but use the proceeds to pay off the non deductible debt such as the main residence loan, and yet still continue to claim the interest on the loan that was used to buy the shares. They argue that the ‘purpose’ of the loan was to buy shares. This may be true, but if there are no shares there is no income or possibility of income so the interest could never be deductible under s8-1 ITAA97 or any provision. Another example is borrowed deposits on investment properties. You borrow the 20% from a LOC and can claim the interest. Once the property is sold you can no longer claim this interest. Tip: Once an asset is sold any loan used to acquire that asset is no longer deductible Note- there are limited exceptions for where the asset is sold at a loss and I will cover this in a future tip.