"Split Home Loan? Go ahead, deduct...."

From: Alan Hill

Just spotted this article by Business Editor David Potts:

"In a breakthrough for mum and dad investors and a blow to the ATO, the Federal Court has ruled that interest on a split home loan used for investment is a legitimate deduction.

It is also a boost for negative gearing, showing that interest on interest can be tax deductible.

Split loans, which allow you to pay off your residence quickly and defer payments on an investment property, took off in the mid-1990's before the Tax Office torpedoed them with a ruling five years ago.

Overturning an earlier ruling, the decision means repayments on an investment property can be postponed until your home is paid off, and the interest is tax deductible.

It could also have ramifications for small business owners who allow their overdrafts to build up so they can afford a holiday or pay other bills."

Interesting......any comments Dale, Rolf etc.

Last edited by a moderator:
Reply: 1
From: Dale Gatherum-Goss

Hi Alan!

It is not a new case as the one referred to was quite a few months ago now. And, I'm not entirely sure that I agree with the author's interpretation of the decision.

The court decision does suggest that split loans could be tax deductible, but, please realise that the same case was lost because the court found that the only reason for doing this was to minimise tax.

A commercial decision is still absolutely necessary.

The door is open. The next case or two will prove very interesting indeed.

Thanks for this

Last edited by a moderator:
Reply: 1.1
From: Rolf Latham

Hiya Dale and Alan

It scares me Alan that you would ask my opinion on tax related issues :eek:) Unlike many people in my field I actually enjoy looking at trying to look at legitimate strategies that could save a client a dollar or two in income tax. Why ?

Because I honestly believe that a dollar reinvested in the community will return far better dividends that a dollar dumped into the tax system. Hence my "quip" that, every man and woman has a moral and ethical responsibility to legally minimise their taxes.

In this instance as always I would suggest one seeks personal tax advice particular to your situation. Because I am NOT a tax practioner I will continue to advise my clients to structure their loans on the basis of currently "acceptable" tax practices and will only vary from that where the clients tax practioner recommends otherwise. For me at least, to do anything else would be to dispense advice Im not qualified to give.


Last edited by a moderator:
Reply: 1.1.1
From: Alan Hill


Sorry if you misinterpreted my comment.

I wasn't seeking your feedback from a TAX point of view, but rather from the Broker point of view as a general product/setup......in the same way I'm sure you discuss P&I vs IO products or Split Loans etc. with clients and how popular/appropriate such a product might be with your Clients.

Accountant advice obviously has the final call on Tax related matters.
Last edited by a moderator:
From: Rolf Latham

Hi Alan

Oh, thats good, coz I knew you wouln't ask me stuff like that :eek:)


Last edited by a moderator:


Reply: 2
From: Jeanette .

Yes I read that article too and wondered whether he is talking about the appeal to the decision of Hart v Commissioner of Taxation [2001] FCA 1547 regarding the 'Wealth Optimiser Loan'. I checked the Federal Court website this morning and the latest information I could get was that the appeal number is N1615/01 and the appeal was lodged on 12/12/2001. The original decision was handed down on 2 November 2001 rejecting the overall principles of the 'Wealth Optimiser Loan'. If anyone knows exactly what case David Potts is talking about, I would be very interested to know so I can read it for myself.
Last edited by a moderator: