Got a question regarding mixed purpose loan interest calculation
For ex.
I have a POoR loan of 500k interest only, on 1/Mar I repay 200K to my loan to prepare redraw for IP purchase.
Same day 1/Mar I redraw 10K
2/Mar , I redraw another 10K (both for 10% deposit , because bank only allow 10K per day)
on 11/Mar IP settled bank withdraw 170k.
on 15/Mar I withdraw remaining 10K to make the load the same shape as it begins on 1/mar (I know this is not deductible debt )
20/Mar loan split to two. one 300k ,shrink original PPoR loan, one additional IP loan 200k. out of with (10+10+170) = 190k is deductible debt.
The interest after split on 20/mar is simple. My question is how to calculate interest between 1/mar and 20/mar.
My understanding of ATO rules is since 1/Mar I repay and redraw the loan, this loan is mixed purpose loan. All the further repayment and interest will be apportioned . Since I don't do any repayment since 1/May, only interest paid will be proportioned.
I can calculate interest daily like:
10K interest from 1/mar to 20/mar
10K interest from 2/mar to 20/mar
170k interest from 15/mar to 20/mar
Is that right?
I can also calculate it monthly according to ATO rules below. But daily calculate is much more that monthly calculation ( My example above is simplified , could not reflect actual data) .
Could anyone point out whether my calculation above is acceptable? Thanks !
FROM ATO website: http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20002/NAT/ATO/00001
Apportionment calculations
19. Where interest on borrowed money accrues daily, we accept that it would be unnecessarily onerous to require a manual daily apportionment calculation.
total interest accrued for the month * deductible interest percentage figure
20. The deductible interest percentage figure is calculated as follows:
((A + B) / (C + D)) * 100
where
A = opening balance (beginning of month) of outstanding principal used for income producing purposes;
B = closing balance (end of month) of outstanding principal used for income producing purposes;
C = opening balance of total outstanding principal;
D = closing balance of total outstanding principal;
For ex.
I have a POoR loan of 500k interest only, on 1/Mar I repay 200K to my loan to prepare redraw for IP purchase.
Same day 1/Mar I redraw 10K
2/Mar , I redraw another 10K (both for 10% deposit , because bank only allow 10K per day)
on 11/Mar IP settled bank withdraw 170k.
on 15/Mar I withdraw remaining 10K to make the load the same shape as it begins on 1/mar (I know this is not deductible debt )
20/Mar loan split to two. one 300k ,shrink original PPoR loan, one additional IP loan 200k. out of with (10+10+170) = 190k is deductible debt.
The interest after split on 20/mar is simple. My question is how to calculate interest between 1/mar and 20/mar.
My understanding of ATO rules is since 1/Mar I repay and redraw the loan, this loan is mixed purpose loan. All the further repayment and interest will be apportioned . Since I don't do any repayment since 1/May, only interest paid will be proportioned.
I can calculate interest daily like:
10K interest from 1/mar to 20/mar
10K interest from 2/mar to 20/mar
170k interest from 15/mar to 20/mar
Is that right?
I can also calculate it monthly according to ATO rules below. But daily calculate is much more that monthly calculation ( My example above is simplified , could not reflect actual data) .
Could anyone point out whether my calculation above is acceptable? Thanks !
FROM ATO website: http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20002/NAT/ATO/00001
Apportionment calculations
19. Where interest on borrowed money accrues daily, we accept that it would be unnecessarily onerous to require a manual daily apportionment calculation.
total interest accrued for the month * deductible interest percentage figure
20. The deductible interest percentage figure is calculated as follows:
((A + B) / (C + D)) * 100
where
A = opening balance (beginning of month) of outstanding principal used for income producing purposes;
B = closing balance (end of month) of outstanding principal used for income producing purposes;
C = opening balance of total outstanding principal;
D = closing balance of total outstanding principal;