The type of loan has no bearing on the interest being deductible or not, therefore it can be an equity redraw, business loan, overdraft, personal loan or even credit card. What the ATO look at is what the funds are used for not where they came from.
If you are a share trader that is you treat your gains and losses from share sales as income any interest charged on money borrowed to buy shares is deductible.
If you are a share investor so you treat your gains and losses as capital, the intention of why the shares are purchased is looked at to determine if the interest deductible against other income or forms part of the cost base of the shares.
Clearly if you are buying blue chip shares the arguement would be that the intention of buying the shares is dividend income and therefore the interest can be deducted against dividends received even if it creates a negative gearing situation where a losses is used to reduce other income.
For this to happen there must be an intention to receive dividend income from the shares so the company would have to either be currently paying dividends or be likely to do so at some time in the future. A case that could be argued with shares in companies like BPC, HDR, SGW for example. Companies that have either paid dividends in the past and are likely to do so again at some time in the future or are in growth periods that could lead to paying dividends.
The arguement would be a lot harder to make though for spec mining companies for example where the likely hood of the company ever growing to the stage of paying dividends is very remote. In cases like this it is hard to argue that the intention is to receive income from the shares so therefore the interest would be treated as being capital in nature and form part of the cost base of the shares.
This is only a general view and is not ment to be a specific opinion
