Interest deductibility - Borrowing to buy cash bond

Loan interest rate: 7% p.a
Cash bond ROI: 5% p.a

AFAIK - For the life of the bond:
1) Interest on loan is tax deductible
2) Interest on cash bond is taxible income

What happens after the duration of the cash bond?
Loan interest rate > Cash bond ROI
There would be a net loss after the cash bond term, with the net loss amount continuing to accrue interest.
Question: Will the interest on net loss after the cash bond term be tax deductible?
 
Loan interest rate: 7% p.a
Cash bond ROI: 5% p.a

AFAIK - For the life of the bond:
1) Interest on loan is tax deductible
2) Interest on cash bond is taxible income

What happens after the duration of the cash bond?
Loan interest rate > Cash bond ROI
There would be a net loss after the cash bond term, with the net loss amount continuing to accrue interest.
Question: Will the interest on net loss after the cash bond term be tax deductible?

Interest is deductible to the extent that the money is/intended to produce your assessable income.

Where there is unlikely to produce assessable income or appears commercially unrealistic the Commissioner is entitled to look at subjective purpose.

Therefore, after taking into account any discounts/premiums and coupons and contingent payments, if there appears to be no overall gain it appears unlikely interest would be deductible to any greater amount than your assessable income.

See Fletcher's case.

Just based on your brief facts ...

Cheers,

Rob
 
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