Author: max.p(Newbie)Newbie 11 Feb 2025
Thank you. This matches my expectations and what I read on the ATO website.
Today I've found this ruling with an example (example 1) that is somewhat related:
Example 1
47. Mr Chancer receives a prospectus inviting participation as an investor in a cattle breeding scheme. The scheme promoters arrange for each investor to borrow $100,000 for the right to participate in the scheme. The interest is payable over the life of the scheme and is financed by a 'round robin' of cheques. Under the scheme, substantial losses are to arise for investors in the first 5 years, small losses in the next 6 years and large net incomes over the final 5 years.
48. Over the 16 year agreement the total of the anticipated assessable income is expected to exceed the total outgoings of interest. However, every investor has the option of terminating his or her participation before the large net incomes arise without incurring personal liability on any outstanding borrowings.
49. Mr Chancer derives considerable assessable income from other sources and considers the investment to be excellent in view of the tax deductions offered by the promoters.
50. A commonsense weighing of all the relevant evidence indicates that the scheme is not expected to run its full course and Mr Chancer's dominant purpose in entering the scheme is to incur the outgoings in order to minimise his tax liability. In the circumstances, as the total anticipated allowable deductions will far exceed the total assessable income reasonably expected to be derived until the time of termination, the excess of the outgoings over the assessable income will not be deductible under subsection 51(1).
My purpose is not to reduce tax liability, but to make profit from capital gains. Not exactly the same, but somewhat related.
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