This question is about a margin loan (shares), but it's probably equally valid for any investment loan, so hopefully someone here can answer it.
I understand the "purpose of loan" test that is applied to new borrowings. But if you deposit money into a loan account and then a short time later withdraw the exact same amount, does the ATO automatically and unconditionally consider that withdrawal/redraw a new borrowing and review the purpose of that redraw, or does it recognise that it is the same money so the original deductable loan value is retained?
Here is an example:
Urinate 100ml into 1L or water. Then immediately take out the 100ml of urine. Would you drink the water?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
For a different type of answer, see:
TR 95/33
Income tax: subsection 51(1) – relevance of subjective purpose, motive or intention in determining the deductibility of losses and outgoings
http://law.ato.gov.au/atolaw/view.htm?locid=%27TXR/TR9533/NAT/ATO%27
This Ruling considers the decision of the Full High Court of Australia in Fletcher & Ors v. FC of T 91 ATC 4950; (1991) 22 ATR 613 (' Fletcher ') and in particular, considers situations in which a taxpayer's subjective purpose, intention or motive is relevant in determining the availability of an income tax deduction under subsection 51(1) of the Income Tax Assessment Act 1936 ('the Act'). It also relates these principles to the usual kind of negatively geared investments.–
Domjan and Commissioner of Taxation) [2004] AATA 815–
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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