Well it appears there is some contradicting views so I'm going to attempting to sum things up in the hope of drawing some conclusions.
On one hand:
It has been pointed out that if I wanted to take out a personal loan to purchase small to mid cap stocks with no dividend yield that I technically would not be able to claim the interest incurred on the loan as a deduction against income from my 9-5 job. This is because the investment is for the purpose of achieving capital gains and not for 'deriving income' -i.e -dividends.
So if the above is accurate, with the example you provided with property Pharmaboy, the parallel situation would be investing in a property that can be rented and therefore is deemed as 'deriving income' as opposed to buying a block of vacant land which is solely for the purpose of capital gains, therefore not 'deriving income'. With this logic I would be able to claim interest incurred on the investment property I was renting out as a deduction against income from my 9-5 job however I would not be able to do so for my investment in a block of land.
on the other hand:
This is a response I received via email from a tax website:
Thank you for your query.
The simple rule is that the deductability of interest is dependent on what the loan funds are used for rather than what the loan is secured by.
This means that a personal loan to purchase shares would have deductable interest. The loan does not need to be a special investment type product.
The shares purchased do not need to have a dividend scheme to be deemed "income producing"
I hope this is of assistance.
Once again thanks to everyone that has contributed to this thread.
p.s - milesg, I am located in glen waverley, melbourne
