Reply: 1.1.1.1
From: Sim' Hampel
I am no expert either BR, but to me it falls into the duck (or fish !) category...
You cannot claim a deduction on interest on loans used for personal use (such as a PPOR). This is not nor has it ever been under dispute.
However, the question becomes; can we structure it in a way in which the transactions are sufficiently "arms length" in nature such that we can convince the ATO that it is no longer a personal asset.
The argument I was referring to is where you use a family trust as the vehicle, and you are both the tenant and the beneficiary of the trust. Since as beneficiary you get the benefits from the trust such as growth in the value of the asset, but you also get to live in the place as essentially a PPOR, the question arises as to whether you are gaining a tax benefit on what looks and smells like a personal expense.
So that leaves us with the task of finding another way of structuring the deal. Note that I don't know the status of this ruling, and indeed it may not actually be enforcable, which is why advice is necessary.
I haven't posed the question to my own accountant yet (since I am currently renting someone elses property), but it is something I am curious to hear his opinion on.
As to your other comments BR, I haven't heard or read anything which states that a family member must "dob you in" about the nature of your structure, indeed my understanding is that the ATO can do whatever it damn well pleases.
Actually let me qualify that... the ATO can do whatever it thinks it can win a court case on !