20 December 202012:50 AM - edited 20 December 202012:52 AM
I am looking at the tax implications of using an investment loan from the bank to purchase high yield dividend stocks. As far as I have read, dividends are treated as assessable income provided they are paid out but not if they are reinvested through a reinvestment plan.
So if I understand correctly, if I were to get a personal loan of $50,000 on a 7% interest rate and found a company at a 7% p.a. dividend payout, I could use the $3500 interest payment on the loan as a income tax deduction on the $3500 dividend yield? Assuming middle tax bracket with marginal tax rate 32.5%, I am therefore am left with $1,136.5 earnings, a 2.275% profit on the $50,000 loan.
Does this method work or have I made an incorrect evaluation of how shares dividends can be treated tax wise?