left over funda from home loan. deductible???

[r3ckless]

Hi guys.

i set up a new loan of $100k. It is svr attached to a transaction account. The $100k is now sitting in said transaction account. For my after deposit and stamo duty us paid. I have $20k left over....

If i repay the $20k from the transaction account back into the honeloan redraw and split that $20k into a line of credit. If i let interest capitalise where the direct debit for this property purchase being an ip vomes from this new loc... is the interest exoense on the loc deductible?

 

[Brady]

Sounds fine if you set up LOC for IP related expenses (excluding interest)

Capitalising interest I see as an issue, would seek ruling before capitalising any interest.

 

[r3ckless]

hmm, thanks Brady.

I thought a private ruling wouldnt neccessarily be required

 

[tobe]

private rulings are never 'neccesary'. They are free, and theres a history or capitalised interest being disallowed, so it would seem prudent.

 

[Simon]

If I understand you right the funds are repaid into the loan.

The new LOC amount is a new loan. The purpose of this loan determines the deductibility of it.

 

[Paul@PFI]

Its straight fwd really. The interest attributable to the $20k will be non-deductible as it wasn't used for income producing purposes. It has never actually been used for any purpose. Pay it against the loan and the apportionment issue goes away. Redraw for property expenses etc and it then becomes deductible again. BUT you cant shortcut that. So go pay it off the loan.