Join Australia's most dynamic and respected property investment community

Using a new loan to pay for interest of an IO investment loan.

Discussion in 'Accounting & Tax' started by Byeow, 15th Jul, 2016.

Tags:
  1. Byeow

    Byeow Member

    Joined:
    20th Oct, 2015
    Posts:
    23
    Location:
    Melbourne
    Hi
    Is it ok from ato view to take a smaller new loan to pay for interest of an IO investment loan?
    And the interest on both the loans are tax deductible?

    Thanks
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,171
    Location:
    Gold Coast
    Possibly........ capitalising interest.

    Possibly if you dont have a PPOR

    Id certainly be seeking very specific tax advice from a qualified pro, not peops like me :)

    ta
    rolf
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,392
    Location:
    Sydney
    Rolf raises a very good point. The ATO have concern about any arrangement that seeks to maximise deductible interest while non-deductible debt is minimised. The consequence they argue is a scheme and so the arrangement can lead to denied deductions. In general terms the ATO consider capitalisation of interest a scheme unless there is a logical purpose/ eg construction period finance, maternity leave, unemployment etc

    That doesnt say its not do-able. For example a temporary arrangement during maternity leave etc. But where you do it solely for the purpose of drawing a loan down to capitalise then it can pose a concern.

    Personal advise is required
     
    Perthguy likes this.
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,014
    Location:
    Sydney
    Perthguy likes this.
  5. Byeow

    Byeow Member

    Joined:
    20th Oct, 2015
    Posts:
    23
    Location:
    Melbourne
    Thanks All!
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,151
    Location:
    Canberra and Sydney
    Hi @Byeow - get specific advice that's catered to your circumstances. A pro accountant like Paul above would be a very good start.

    Cheers

    Jamie