Awesome, thanks so much again Terry.

***ANSWERED*** (however un-verified by an accountant figure)
Disclaimer/Warning: Errr, yeah… so while thismakes sense to me, I'm no accountant and Terry's stated the same. Anyone with a background in accounting is more than welcome to either verify or add to the reasoning in fact, I encourage someone to

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To close off this thread in case anyone else does read it,

Using Redrawn money to buy shares from a non-deductible loan will convert that portion of the loan into a tax-deductible interest portion. The redrawn amount should be calculated as a % and that % used when calculating how much interest is deductible.

Example.

DEDUCTIBILITY
100,000 loan on a block of land with 20,000 redraw (extra repayments on top of interest): total amount owing 80,000. Interest rate of 10% (to make things simple, however we may be heading that way)

10,000 is redrawn to buy shares, bringing the total amount owing to 90,000.

10,000 as a % of 90,000 is 11.11%

90,000 @ 10% pa = $9,000 interest, of which 11.11% is tax deductible

9,000 x 11.11% = $999.9 deductible interest

EXTRA REPAYMENTS
Any extra repayments are treated the same way as above. 11.11% will always be deductible, as you can't choose which portion of the loan is to be repaid.

10,000 payed back into the account will actually be treated as 11.11% payed back into the tax deducible portion of the loan, and the remaining 88.89% into the non deductible.

So back to 100,000 loan with 90,000 owing, 10,000 paid back into the account bringing us back to a total of 80,000 owing. As we're playing with percentages here, in the end 11.11% of the interest is still going to be tax deductible as the 10,000 payed back into the account is split as such

10,000 x 11.11% = $1111 payed back to the "shares" portion of the loan
10,000 x 88.88% = $8888 payed back into the "land" portion of the loan

Therefore, 80,000 @ 10% = $8,000 interest of which 11.11% is tax deductible, = $888.88

Ok, so I've now redrawn 6k and bought shares with them. When push comes to shove how does one prove that any extra repayments going into the homeloan are not paying off the redrawn funds for the shares?

I'm hesitant to claim the interest that the 6k is incurring (though I feel that I would be entitled to) on the basis that I don't know how to prove that if I were to pay a further 6k extra into my loan, that I weren't paying off the "shares" money.

I hope that makes sense.

I thought that interest on a non-earning investment (block of land), was only allowed to be added to the cost base of a property upon sale. My intention with this block has always been to build for investment, but how does one prove that. In my case it may be a few years before I can afford to actually build out there.

To be honest Jaffa, I don't know. I believe I misinterpreted the Concession dates, and I'm not sure they still apply today. I was hoping to run into someone else who knows about these concessions here

Also, thanks LA

Gosh I got a few big things wrong. I'm trying to find the article I read that mentioned children paying Board at home, and how the money was treated, as I recall reading something about family members in general. However I may just be dreaming.

http://www.osr.qld.gov.au/taxes/duties/home_concession_may_04.shtml

I realize now that the dates are no longer applicable.

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Transfer duty relief for first home buyers until 31 July 2004

Under the new transfer duty arrangements, no duty will apply to the purchase of a first home up to $250,000.

Where the price exceeds $250,000, the existing transfer duty arrangements set out in columns 1 and 2 of Table 1 continue to apply. In addition, however, a first home duty rebate will apply. This rebate is capped at $2,500 and reduces by $100 for every $10,000 over $250,000. The rebate cuts out completely for homes costing $500,000 or more.

Followed by

New mortgage relief for first home mortgages

Under the new mortgage duty arrangements, no mortgage duty will be payable by a first home borrower for the first $250,000 of a loan to buy or build their first home.

Mortgage duty, at the rate of $0.40 per $100 or part of $100, will apply to any amount secured in excess of $250,000.

However, "Note: Mortgage duty is to be reduced by 50% from 1 January 2008, and abolished in full from 1 January 2009."

I couldn’t find it at the ATO site, but I did find this from the FHOG site.

How long must I reside in the property for it to be my principal place of residence?

* If you have entered into an eligible transaction prior to 1 January 2004, there is no minimum period that you are required to live in the property to maintain your grant eligibility. However, the onus is on the applicant to prove that they have lived in the property as their principal place of residence, if requested by the Office of State Revenue.
* If you have entered into an eligible transaction on or after 1 January 2004, you must remain in continuous occupation for a period of at least six months.

http://www.osr.qld.gov.au/fhog/faq/faq_residency.shtml