Is interest deductable for donations ?

[Bushy]

Hi all,
I am interested to know if this scenario would work as a way of reducing tax legally and helping out a charity.

A scenario could be (and it's not mine)

PAYE income 50k
Growth of IPs per yr 200k
Tax payable $9,600 assuming no IP deductions
Nett income $40,400

If I borrowed 20k and donated it to a recognised charity, would I be able to claim the 20k as an outright deduction against my PAYE income and would I also be able to claim the interest on the loan, now and in future years.

If the above is do able, the outcome would be win / win and would look like this.

PAYE income 50k
Growth of IPs per yr 200k
Donate 20k
Taxable income 30k
Tax payable $3,600 assuming no IP deductions
Nett income $46,400
Less an interest cost of $1600
In hand cash after tax and interest of $44,800

Everyone wins,Charity got 20k and you increased your after tax income by over 10%, Your nett worth didn't increase as much as it could have but if you are well and truly financially independant it might not hurt to help out along the way.
Feed back appreciated.
Regards Bushy

 

[Simon]

I believe in this case that you would only be able to claim the actual donation. I cannot back it up and I might be wrong.

I bet our resident accountants will know the references to support or disprove your idea.

 

[Mry]

Julia might be able to answer this question better , but...

I believe the answer is no. Division 30 enables a person to claim a deduction for charity, not section 8-1 (the general provision for claiming a deduction) but a claim for the interest would not work under any other provision than 8-1, and 8-1 is about claiming a deduction to earn income. And here is a flash of the obvious - making donations is not an income producing activity.

 

[Debt Junkie]

making donations is not an income producing activity.

I agree with Mry. No way is that deductible ....

DJ