Hi
I seek guidance on the tax treatment of the following proposed transactions:
Background: I currently have:
- A home loan with available redraw facility ($80,000 available)
- An existing share portfolio of $90,000 value (separate from any borrowings)
Proposed sequence:
- Redraw $80,000 from home loan to purchase shares for investment purposes
- Then sell my previous portfolio of $90,000 worth of shares from my existing (non-debt funded) portfolio at a significant capital gain.
- Use the sale proceeds to make an ~$90,000 principal repayment on my home loan
- The structure of the investment portfolio will be far simpler than the previous porftfolio although with some overlap (same index ETFs but with different weightings and no individual stocks unlike the original portfolio)
Questions:
- Are these transactions considered separate for tax purposes, given they involve different sources of funds (borrowed money vs. existing investments)?
- Would this arrangement be viewed as an artificial or contrived scheme under general anti-avoidance provisions?
- Does the timing between transactions affect the tax treatment?
- Are there any specific provisions that would prevent me from claiming tax deductions on interest for the $80,000 borrowed to purchase the new shares?
- Would the capital gains tax treatment of the share sale be affected by this sequence of transactions?
Purpose: The intention is legitimate debt recycling to convert non-deductible home loan interest to tax-deductible investment debt, while also taking profits on existing investments.
Thank you for your guidance.
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91 views
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