- April 7, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Understanding Brad’s Tax Situation
A friend of mine, letâs call him Brad, claims deductions on interest paid on is PPOR because he has investments in shares.
So Iâll simplify Bradâs scenario.
Brad buys a PPOR with a standard mortgage with an offset. At this stage he has no other investments. Brad works hard and saves all his money (earned from a normal PAYG wage) and tops up his mortgage offset to completely cover the outstanding loan amount over a few years. Great job, Brad! Itâs a standard offset, not a redraw facility.
After a little time, Brad looks into the share market. He uses funds from his offset account to purchase some shares. Non dividend shares.
Tax time comes around, Brad claims the PPOR interest (which started accruing after he made withdrawals from the offset) as a deduction.
Is this an allowed deduction?
Iâve read a bunch of guides/TRs etc, and I donât think he can. Otherwise wouldnât everyone just do it?
As Iâm no tax expert, I am just trying to work out if I can do the sameâŚ. đ
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FREE Legal Document translation
 ****** just grabbed a
Brad will be getting a call from the ATO at some stage in the future
OP is totally ‘Brad’ đđ
Brad is using money from the offset.. Brad is not borrowing money for shares.. Brad borrowed money for his house.. Brad is going to get a rude shock
Needs to be done using redraw not offset then it is allowed
Brad is not smart, Brad is the opposite of smart and committing white collar crime, Brad probably won’t go to prison, but he will get the chance to pay back all the tax deductions along with a fine and probably have his entire tax paying life audited.
Don’t be like Brad.
There are two reasons why the deduction is not valid. âBradâ would need to pay down his loan with the money from his offset and then draw it back down (ie. To make a new borrowing – ideally in a new loan split).
Secondly the shares need to be income producing (or have a reasonable expectation of being income producing) for the interest to be deductible.
If shares with no possibility of a dividend then no.
Must be a potentially income producing asset and it must be clear that you’re borrowing the money for that somehow.
debt recycling is complicated to those who haven’t done it and I’m one of those people.
This wasnât even a hard thing to get right. Brad thought he was too smart to do his own research or obtain professional advice.
You donât get a deduction just because you could have structured your affairs in a way that could get you a deduction but didnât want to bother with the admin.
Brad is an idiot and i hope he gets caught, it is not up to the tax payers to cover his interest payments on his PPOR.
You can do the same except that when you do it you first pay down the loan without closing the loan facility. Then you redraw the loan to purchase the shares.
No he canât claim it, he shouldâve transferred the money to redraw and then pull it out to offset agin then invest it, itâs all a silly game really and you have to play by the rules to win. If you skip a step you get in trouble with the ato.
sounds like brad has misunderstood debt recycling.
Brad doesn’t know how deductions work.
Brad’s going to be getting a debt from the ATO
Don’t be like Brad.