Loc interest on interest
- Thread starter TheLake
- Start date
Requires specialist advice,
similar scenario to http://somersoft.com/forums/showthread.php?t=104415
similar scenario to http://somersoft.com/forums/showthread.php?t=104415
I capitalize my interest and also claim it as a tax deduction but my rent also gets paid into my LOC so it's a bit different to the example Dave linked.
Generally interest on interest is deductible. But the ATO may deny the deduction under Part IVA of the ITAA36, if it is being done as a scheme with a dominant purpose of increasing deductions.
A simplistic interpretation that I have heard and works for me is if you have poor debt and ip debt, the ato may apply no go . If u don't have a ppor debt then it would appear to be less problematic
Ta
Rolf
Ta
Rolf
As Terry says the answer is maybe. The nature of how the bank allows this is what I question. If you have a overall limit and the bank allows one to capitalise (deductible) and the other takes repayments (PPOR) then I would think there is a split loan problem. It may not seem like a serious issue but the ATO approach is to conclude that your deduction is excessive and deny 100% of it. You then have to object and demonstrate a good case for an amount that is reasonable. That can be a challenge.
