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Dear All If your predominate purpose is to borrow money in the pursuit of income, and essentially your expense has been incurred in gaining or producing assessable income (per s8-1 ITAA36) then the tax office will not have a problem with capitalising interest on interest. Where this...

Hi Redwing Yes the above does look correct : ) Cheers Corsa

In applying the tax laws in accordance with ITAA97 s 8-1 which allows a deduction for all losses and outgoings to the extent to which they: (1) are incurred in gaining or producing assessable income (the 'first limb') (2) are necessarily incurred in carrying on a business for the purpose of...

Harts case is commonly discussed on this forum and is a great example of how not to set up your accounts. Particularly as the tax office treats it as a scheme and disallows deductions per TR98/22 Let's consider the facts firstly of Hart's case. It involved a typical linked or split loan...

Yes MJK, this is correct. My understanding is that you can accrue interest on your VLOC up until you reach your VLOC credit limit - so yes - interest on interest accrueing and compounding without reduction. And then if 100% of this interest on interest can be directly traced back to the...

Yes, you can do this Thommo. As Bort points out, the interest on the Margin Loan facility specific to the credit card payment will be deductible depending on what the purpose of the credit card transactions were for. Investment = deductible Margin Loan Interest Personal = non deductible...

Hi RichardC Yes, you are on the money. Not everyone is familiar with the term compounding interest but in essence that is what we are doing. Simple is good - its easier to understand :) Best Wishes Corsa

Thanks Cheeks :)

Without getting too detailed, my thoughts are it is the concepts that are important here ie the big picture of how the portfolio is structured. I dont really want to go down the path of saying we will be $20,000 better off under one model vs another model :) That plus I think that at...

No you cant do this. Yes, that is correct. Yes, this is correct. You have to separately account for personal expenditure and investment expenditure. Where you incur an expense (including interest) in the process of generating income then those expenses will be deductible. You...

Diagram of Structure as attached.

Yes this looks right :)

Yes this is correct :)

No, this was not the reason. Budgeting was probably the main reason. I dont want to be spending my investment income just yet and lumped in one account would get tricky for me personally. I think it is fine to keep them separate or have them together - whatever works and it makes no...

No this is fine particularly if you have this linked as an offset against your PPOR. Although keeping it separate is also just as fine. This is the way to do it then all LOC interest should be deductible. Try not to cross collaterise if you can avoid it by having LOC secured by only one...

No this is fine. So you could: pay for property expenses on your credit card and pay this off on the due date from the property a/c or say a LOC with respect to the property a/c if you just have cold hard cash in their then there is no additional deductibility for interest borrowings to fund...

Sorry Will. I have to use you as the guinea pig :) In my post I highlighted that the underlying security of the loan is not relevant. The same would apply for the Property A/C. There are two things in a transaction - the first is the origination (the security) and the second is the...

Dear All This post was prompted by the number of threads that have been coming up lately seeking to clarify the treatment of Interest on Interest and Capitalising Interest concepts and in general how to deal with interest. Interest is deductible to the extent to which it is incurred in...