I am looking for an opinion on the following strategy. (Please note that to make things clearer I will simplify the real situation).
Jim had a mortgage account split in two sub-accounts set up to finance his PPOR purchase.
Jim also runs a business servicing his clients through his company.
Jim has some spare cash, so he pays off the first sub-account.
Then he designates this sub-a/c (with zero balance) as his company's line of credit and draws some funds used as business operational expenses (to buy equipment, pay Jim's salary, etc). Interest payments on this sub-account are now tax deductible for the company.
What Jim has done - he made his non-deductible debt fully deductible without incurring any cost.
Is Jim correct or he might be in trouble with the ATO?
Say cheese
Lotana
Jim had a mortgage account split in two sub-accounts set up to finance his PPOR purchase.
Jim also runs a business servicing his clients through his company.
Jim has some spare cash, so he pays off the first sub-account.
Then he designates this sub-a/c (with zero balance) as his company's line of credit and draws some funds used as business operational expenses (to buy equipment, pay Jim's salary, etc). Interest payments on this sub-account are now tax deductible for the company.
What Jim has done - he made his non-deductible debt fully deductible without incurring any cost.
Is Jim correct or he might be in trouble with the ATO?
Say cheese
Lotana