fgler said:I visited my accountant yesterday and ask him whether this method is allowed. My accountant told me that recently there is a case using this method being ruled illegal by the commissioner of tax. I remember he mentioned something like the Hart's case?? Do any of you know any about this case?
What the argument point is the rental income generated by the IP must go towards paying the outgoing costs (interest, fees, maintenance cost). If the rental income is not enough to cover the outgoing costs, then any money borrowed (and its interest) to cover the shortfall could be tax deductible. Please correct me if my accountant is wrong.
I was under the impression Hart dealt more with split loans - and making sure that when you are paying off debt (interest), it must come off both the deductible and non deductible debt. Rather than accruing interest on top of interest on the deductible side, and purely paying down your non deductible debt.
I would be very surprised if you were (or can be) forced to use any income for any specific purpose .. really does not make sense - but someone may prove me wrong! Say if you had no debt (or even if you had debt), and you receive rental income - no one can tell you that you need to use that on say council rates for the property, as opposed to buying a new porsche ....
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