Interest deductions for Navra invested funds

Hi

This is probably a really simple question but I thought I’d check before I progress any further.

I’m thinking of increasing my holdings in my Navra fund with some borrowed money.

Now, I assume the interest incurred on the borrowed money will be tax deductible each year even though I’m reinvesting the Navra fund payments?

Also, the loan that I am withdrawing the funds from is in joint names with my partner but the fund is only in my name (long storey why we did it this way) – does this have any impact?

Thanks in advance

Cheeks
 
Borrowings for income producing assets are tax deductable.

Its the owner of the investment that counts re tax rather than the borrowers.

So you're fine.

PS. I'm not an accountant.

MJK ;)
 
Remember that even though you are reinvesting the distributions, they still count as income for tax purposes, and you must declare them on your tax return !
 
:confused:

Sim - So I have to pay tax on the distributions even though I have reinvested them each tax year? I assumed the tax would be paid once I accessed the money from the fund?
 
Yup, sorry, but that's the way it works.

There are two components to the profits you make from the fund (or any investment for that matter)...

1. income - from the Navra fund this is a combination of dividends paid on the shares held by the fund, plus trading profits (which are treated as income, not capital gains, to the fund). This income is paid out quaterly in distributions, and is income you must declare.

2. capital growth - any growth in value of shares held by the fund is reflected in the unit price of the fund, but is not automatically distributed to the unit holders. This money is distributed if the fund sells the shares to make a profit (will be distributed as income in the next quarterly distribution), or if you sell units in the fund (shares will have to be sold to get the cash to pay out your money, and there may be capital gains made). You would only need to declare this if you received capital gains as the result of selling units in the fund.

There may be other situations where you earn income or capital gains from the fund, but that's at least the basics.

The argument about paying tax on distributions even though you reinvested them is basically - you earned the money, you pay the tax, regardless of whether you have the money in your hand or whether you invest it somewhere. The automatic reinvestment is just a service offered by the fund manager, it has (almost) exactly the same effect as them having sent you a cheque for the distribution, and then you sending them back another cheque to invest an additional amount equal to the distribution amount.

I suggest you get yourself an accountant to help you with your tax returns and tax planning. Better to get it done right the first time !!
 
Back
Top