My husband and I have a joint PPOR purchased in 2023, with a joint PPOR loan of $xx0,000 remaining. We are looking to split the joint loan into 2 loans, both of which will remain as joint loans as required by the bank. The 2 joint loans will be loan 1 of $x00,000 and loan 2 of $x0,000. Loan 1 will still have the $x00,000 to be paid in monthly increments, whereas Loan 2 will be paid off in full. Loan 2 will have an associated banking account, where this banking account will be solely under my name only. If Loan 2 is paid off in full, can it be redrawn in monthly increments, so that the redrawn amount then gets transferred into an investment account solely owned by me. The monthly loan repayments owed on the redrawn amounts on loan 2 will be paid by the sole banking account owned by me only. The investment account owned by me will use the redraw funds to purchase shares/ETFs solely under my name, which will earn dividends, therefore the shares/ETFs is an income producing investment in my name only. Since the dividends are less than the interest repayments on loan 2, can I claim 100% of the entire interest incurred on the redrawn loan as deductions in my tax return. The income producing shares/ETFs will be declared as income in my tax returns.
In short, seeking to get confirmation that I can debt recycle and claim 100% of the interest on the joint loan as deductions on my tax return, noting that whilst the original purpose of the joint loan with my spouse (husband) was to purchase the PPOR, the split portion of the loan was paid off in full, and used this fully paid off loan to redraw in monthly intervals to purchase income producing shares/ETFs at monthly intervals, where these shares/ETFs are in my name only. I will be the only person that will be declaring the income earnt from the income producing shares/ETFs.
I sought clarification from my accountant, however the response from the accountant appears to contradict to the ATO community response. Due to this contradiction, I am seeking for clarity from the ATO.
The response from my accountant is as follows:
"Only the legal owner of the investment can claim so if the loan is in joint names, but the investment is in 1 name, the interest will only 50% tax deductible to that single owner of the investment."
I have seen the following link from the ATO community that seem applicable:
https://community.ato.gov.au/s/question/a0JRF000003BQzx/p00368936
In the link, RachelATO confirmed it is possible to claim 100% of the interest incurred on the redrawn loan, but 1) this was back in May 2025, and 2) RachelATO refers to a private ruling, with some slight nuances, including being in a da-facto relationship with loans secured by two properties. Nevertheless the private ruling notes that "the original purpose of the loan was to purchase property. You created a split loan of $xxx,xxx and paid this amount off in full. you then used this loan to purchase income producing shares of the same value over the 20xx year. these shares are in your name only. As you have used the loan funds to acquire income producing shares the interest expense is an allowable deduction. In this case the loan is under both and your partner's name, however as the shares are in your name the interest expense will be a deduction for you in your tax return. Therefore, you are entitled to claim a deduction for the interest expenses attributable to the loan funds that were used to purchase income producing shares in your tax return under section 8-1 of ITAA 1997"
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