Repaying investment loan when selling shares with capital gain - all profit or just loan amount

Question

AshleyATO · Accepted Answer

Hey ,   Thanks for the question. There are a couple of issues that need separate consideration for your scenario. First is to determine if the investment loan is for investing or trading as it can depend on a number of circumstances. You can read about the distinction between the two on our website (https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/shares-and-similar-investments/share-investing-versus-share-trading).   When you make a capital gain on share investments there are capital gains tax consequences and we've got some web content on how the capital gains tax affects shares and units (https://www.ato.gov.au/forms-and-instructions/capital-gains-tax-guide-2023/part-a-about-capital-gains-tax/investments-in-shares-and-units).   Where you are continuing to use the investment loan for investment purposes you might be able to continue to claim the interest on the remaining loan balance provided that you meet the conditions to do so, information about eligibility is found here (https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/investments-insurance-and-super/interest-dividend-and-other-investment-income-deductions).   You would need to seek advice from the Bank or a financial planner about re-investment or conditions required to pay amounts back into the loan as the repayment isn't a taxing point but it might impact the ultimate deduction on interest providing the conditions are met. We have information about investing in bank accounts more generally on our website (https://www.ato.gov.au/individuals-and-families/investments-and-assets/investing-in-bank-accounts-and-income-bonds) that might answer your questions.   , where a CGT asset is sold and capital gains tax is paid, the proceeds can be used for reinvestment and will likely form the cost base of the new CGT asset. Sometimes companies offer dividend reinvestment and we have guidance for this online (https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/shares-and-similar-investments/dividend-reinvestment-plans).   The important distinction with this question is the conditions of the loan which is not something the ATO can advise on. The answer to this question may change depending on the circumstances and while the above information will help you in determining the answer the ATO is always able to consider your circumstances in more detail and provide a tailored response. Here is information on Applying for a private ruling (https://www.ato.gov.au/about-ato/ato-advice-and-guidance/ato-advice-products-rulings/private-rulings/applying-for-a-private-ruling).

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