While responding to another thread about keeping investment monies separate from personal monies, it reminded me of an article I read in yesterday's Sunday Mail.
From memory, the article covered the story of an investor who borrowed $100,000 to buy an investment (some shares). The investor deposited the loan monies into their personal account and then wrote out a personal cheque to the share broker for the $100,000. When the investor went to claim the loan interest as a tax deduction, the article stated that the ATO rejected the claim.
On first glance, this may seem somewhat harsh or even unfair. For example, if the investor had say $200 in their personal account and deposted the $100,000 loan monies - then one would have thought that, when the $100,000 cheque was written to the broker, surely it was the loan monies that was covered in the cheque.
But, what about this scenario - if the investor had say $100,000 in their personal account and deposted the $100,000 loan amount - how would the investor prove the the loan monies was used to cover the broker's cheque?
IMHO, it doesn't really matter if the article is based on a true story (I am guessing that it is) but it does give another example of why it is wise to always keep investment monies separate from personal monies (I always try to keep business monies separate from investment monies - SMSF, Hybrid trust, etc and both separate from personal monies - means more bank accounts, more in bank fees, multiple books set up in MYOB, etc but does makes tracking of monies easier).
I don't have the article with me so I can't quote from it - I would appreciate any input from our "resident accountants" such as NickM or DaleGG as they may have more knowledge of this particular case. Comments from other Forum members would also be welcomed.
From memory, the article covered the story of an investor who borrowed $100,000 to buy an investment (some shares). The investor deposited the loan monies into their personal account and then wrote out a personal cheque to the share broker for the $100,000. When the investor went to claim the loan interest as a tax deduction, the article stated that the ATO rejected the claim.
On first glance, this may seem somewhat harsh or even unfair. For example, if the investor had say $200 in their personal account and deposted the $100,000 loan monies - then one would have thought that, when the $100,000 cheque was written to the broker, surely it was the loan monies that was covered in the cheque.
But, what about this scenario - if the investor had say $100,000 in their personal account and deposted the $100,000 loan amount - how would the investor prove the the loan monies was used to cover the broker's cheque?
IMHO, it doesn't really matter if the article is based on a true story (I am guessing that it is) but it does give another example of why it is wise to always keep investment monies separate from personal monies (I always try to keep business monies separate from investment monies - SMSF, Hybrid trust, etc and both separate from personal monies - means more bank accounts, more in bank fees, multiple books set up in MYOB, etc but does makes tracking of monies easier).
I don't have the article with me so I can't quote from it - I would appreciate any input from our "resident accountants" such as NickM or DaleGG as they may have more knowledge of this particular case. Comments from other Forum members would also be welcomed.