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  • Profile photo of PosEnterprisesPosEnterprises
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    @posenterprises
    Join Date: 2006
    Post Count: 290
    August 25, 2009 - 5:23 am

    Any accountant here!

    Can you please advise if the line of credit is still deductible, when an asset against it has been sold.

    eg sell IP with LOC against it, IP loan paid out in full but still have LOC loan can i still get tax deductions against my income.

    Thanks

    Profile photo of Dan42Dan42
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    @dan42
    Join Date: 2008
    Post Count: 619
    August 25, 2009 - 11:57 pm

    The problem you may have is that if you had the funds from the sale to pay out the LOC, and you CHOSE not to, the nexus between the interest payments and the relevant income earning activity will be broken, and therefore not deductible.

    However, in Brown's case, the monies received for the sale of a business did not fully repay the loan taken out, so the interest was deductible after the business had ceased trading.

    http://law.ato.gov.au/atolaw/view.htm?docid=DTR/TR2003D8/NAT/ATO/00001

    Profile photo of KennyjaizKennyjaiz
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    @kennyjaiz
    Join Date: 2009
    Post Count: 69
    August 26, 2009 - 4:23 am

    Agree with Dan42, unless of course you can demonstrate nexus (connection/relationship) of the LOC loan to an income generating activity (not hobby or private nature). (eg, you used it for deposit for an investment property)

    Interesting that you still have a LOC loan when the security asset has been sold off?!

    Profile photo of PosEnterprisesPosEnterprises
    Member
    @posenterprises
    Join Date: 2006
    Post Count: 290
    August 26, 2009 - 5:13 am

    Sorry forgot to mention LOC against PPOR. Have not sold yet just seeking clarification and advised by accountant that can't claim it against income when asset sold.

    Thanks all

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    August 26, 2009 - 12:46 pm
    Dan42 wrote:

    The problem you may have is that if you had the funds from the sale to pay out the LOC, and you CHOSE not to, the nexus between the interest payments and the relevant income earning activity will be broken, and therefore not deductible.

    However, in Brown's case, the monies received for the sale of a business did not fully repay the loan taken out, so the interest was deductible after the business had ceased trading.

    http://law.ato.gov.au/atolaw/view.htm?docid=DTR/TR2003D8/NAT/ATO/00001

    Thanks Dan, I was looking for that one.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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