ATO to reject capitalisation of interest on investment property loans?

Discussion in 'Accounting and Tax' started by Shadow, 25th Apr, 2012.

  1. Aaron_C

    Aaron_C Finance Broker

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    Kudos to that Rob.

    Taxable Income = Assessable Income - Allowable Deductions

    Each one has their own definition and case law and you can never ever equate the 3 terms.
     
  2. gabs247

    gabs247 Member

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    Sorry, to hijack, stumbled across this after trying to find out more about Capitalising Interest.

    This is the situation:

    Loan is an investment and balance starts off at X, with Interest Only.

    End of the month, interest is calculated at RATE * days in month / 365 and added onto loan balance.

    Repayment made on anniversary of opening loan (at a later date) and is actually RATE / 12!

    So, the loan balance actually fluctuates, just a small amount, but it seems to go up for shorter months and down for longer months.

    Any thoughts? Why do they have to try to reinvent the wheel...
     
  3. HotRod

    HotRod Rental Liverofferer

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    Would have thought that is ok.

    The intent is for it to be IO by the sounds.

    Just the way the bank calculated the interest and how much you pay that makes it vary.

    But I'm no tax lawyer.
     
  4. westminster

    westminster P Plate Developer

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    My repayment is never rate/12 mine is different for months with 28, 30 and 31 days. But my bank auto draws it off account and they just take their 28/30/31 days of interest on anniversary date.
     
  5. gabs247

    gabs247 Member

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    Yep, that's what my old bank did...this new one seems to be ridiculous.

    I'm sure that the only reason they do it, is because they know more often than not they can rip customers off this way by baffling them, there is no sense to it otherwise. I had a previous employer that did the "average monthly salary" calculation as well, works well until you leave and then you potentially miss out on days pay...I find it ridiculous when they can just work out your hourly/daily wage and pay that; they claimed it was too difficult to calculate the 1000+ employee wages as a daily/hourly wage, that's simple maths!!!

    Rant over...