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Hi Tax People,

I have a joint equity loan with my wife. We both have individual online broking accounts.
I have been told by our accountant that my wife or myself can use money from that loan to buys shares individually and he would make “loan up” saying the money was borrowed from the account and therefore claiming the interest individually.
To keep this cleaner for tax purposes my bank said we can split the loan and call loan 1 ( wife investment loan) and say loan 2 ( Peter (me) investment loan).
My question is

1) if wife wants to pay her loan down , I’m wondering if that’s possible with the original “loan up” document written up at a certain amount and as it’s paid down obviously the loan has reduced and wouldn’t match the original loan amount.

Any help would be great.
Also if any one is a subject expert on these setups would love to make an appointment for advice happy to travel.

Regards Peter

7 months ago

Responses

Hi Peter,

Not sure about the 'Loan up' - not a terminology I've used, but from a general perspective:

Any borrowing for income producing purposes, the interest accrued can be claimed against that income (be it capital gains or dividend purposes).
Where an original home loan is extended for these purposes and then amounts repaid, the format becomes fairly complicated and messy. If continued borrowing and repaying, can be messier still.

Split loans are a great way of borrowing for the purchases, and still being able to direct normal repayments where you want. You can pay down personal debt quicker and leave investment debt to run its course. Be wary though - if buying and selling shares regularly, you can direct the profit component where you like, but should use the initial investment component against the investment loan.

Speak to a CPA or CA accountant with knowledge in this area. Your basic tax preparation person may not be up with this area and the issues that can come about. A complicated area that can cause larger issues if done wrong at the start. Worth a little investment now to get the right advice for your circumstances.

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