Hi all,
If, hypothetically,I had an L.O.C. drawn down for $100,000.00,say $75,000 for an IP and $25,000 for shares,how does the tax man treat repayments……can I argue that all the money I pay back is for the share component.for instance,or does little Jhonny say it is apportioned on a 3:1 basis,so both are repayed at the same time?
Thanks,ToolsHave the LOC in two spilts and then pay back whichever you need.
All the more important if you use your LOC for non deductible purchases.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi MH,
thanks for you reply…..but what if it wasn’t split,and had been used for two or more deductible investment purposes?
ToolsTools,
Any repayments are pro rataed unless the funds are from the sale of one of the investments you borrowed for. ATO ruling TR2000/2
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Hey Tools, as they are both deductible does it matter which is paid back?
Although I suppose it does if you sell the shares, but if you’re just paying it off, it shouldn’t affect your ‘income’ as you still claim all the interest?
Cheers
MelMel
You’re right but then you still have to split the interest between the appropriate item numbers in the tax return/s. I would normally recommend the pro-rate approach unless there is good reason NOT to use it.
As you say, if the purpose to which the loan was put was ALL income generating (and hence all the interest deductible) then it doesn’t matter which (in the investors mind) is repaid first.
In any event you’d need some good record keeping to track the components of the loan !!!
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