Oh No !! Not capitalised interest again.

[BV]

madmurf,
(I'm still going to check with an accountant as logic and the ATO don't always see eye to eye).
Michael

Speaking to your accountant is a good thing, but speaking to the ATO
could also be beneficial.

However, sometimes you can get different interpertation of the rules
by simply speaking to different ATO staff.

I would have thought that this is not done on purpose to confuse the tax payers
but it is probably a weakness of the ATO help desk that needs to be addressed.

cheers,

 

[MJK]

Speaking of speaking to accountants....I spoke to mine yesterday.

He said it wasnt an issue to redraw funds from a loan account to pay interest ( ie capitalising ) provided the balance of the loan did not exceed the original purchase price of the asset.

EG: say you had an IP loan ( LOC ) for 300k and you payed it down to 250k. Then say you had a cash flow crisis and rather than paying the interest from personal funds you allowed the loan value to increase when payment of interest fell due. Provided that the loan balance stayed below 300k all was well and deductable. Businesses do it all the time he said... developers let interest capitalise until sale of the developement...share traders have accounts that acrue interest while purchases and sales are made from the same account etc...

Actually I wanted to argue it out with my accountant but thought he better trained than I after being in the business 40 years?

MJK

 

[MJK]

Another scenario................

Say you purchased an IP with two loans at different banks.


eg:
purchase price 300k
LOC 100k
I/O 200k

Say you payed the LOC down to 50K and then began to redraw from the LOC to pay the interest on the I/O. ( proviso: without the LOC balance exceeding 100K )

Wadaya reckon? My accountant would say fine...all deductable.

MJK

 

[Twitch]

.... provided the balance of the loan did not exceed the original purchase price of the asset.

Mine does and according to my accountant this is not a problem I wonder what the basis of this particular constraint is.