08 Mar 12 Part IVA application to an "investment loan interest payment arrangement" - TD 2012/1
On 7 March 2012, the ATO issued Taxation Determination TD 2012/1 entitled "Income tax: can Part IVA of the Income Tax Assessment Act 1936 apply to deny a deduction for some, or all, of the interest expense incurred in respect of an 'investment loan interest payment arrangement' of the type described in this Determination?"
It was previously released in draft form as TD 2011/D8.
It is often said that taxpayers who enter into an investment loan interest payment arrangement do so for the purpose of "paying their home loan off sooner" or "owning their own home sooner".
The Determination answers the question posed thus:
"Yes, provided that the interest is otherwise an allowable deduction. In the context of Part IVA of ITAA 1936 a taxpayer's purpose of 'paying their home loan off sooner' or 'owning their own home sooner' does not prevent the application of s 177F to an 'investment loan interest payment arrangement' of the type described in...this Determination."