Top ups and types of investment

[ashalim]

Hi all,

I am planning to top up my current IP loan. Say I get $20k top up, originally I am planning to keep that in the loan account as a buffer.

Now I'm thinking of using it to trade shares (covered calls). If I use the 20k for share trading and later IP need repairs, etc and I need to use part of the 20k for IP. Is the interest charged still tax deductible? Will it be contaminated if I use the equity for 2 different types of investments?

Note: the loan is with We$tpac.

Thanks
ASH

 

[Peter_Tersteeg]

It's all for investment purposes. As long as the investments are all in the same ownership structure (ie. the same names for ownership of both the property and the shares) I can't see any problems in terms of tax deductability of interest. I'll add the usual disclaimer of check with your accountant for specific advice.

In the current finance environment, Westpac might want you to disclose specifically what the use of the funds are for, but telling them it's for shares might send them into a flap, so if they don't ask, I wouldn't bother telling.

 

[Ms Jade]

The interest is deductible as long as it's for investment so either property or shares would be fine. It only becomes a problem if you also decide to use it for a holiday or some personal purpose - which I'm guessing you already know.

 

[ashalim]

Nah, Shares or IP only and it will all be under my name

Thanks for the replies. I was also thinking of splitting into a separate investment loan, not sure how much work it is to do it this way. I'll ask a broker, probably they may be able to help.

 

[Terryw]

Is $20k enough to do covered calls? US shares maybe?

 

[ashalim]

Hi Terry,

Yep, US shares. 100 shares per contract