Tax advantages of borrowing to invest

There are several tax advantages when you borrow to invest in shares:

  • you can claim your interest payments against your taxable income and if earning less on the share investments than the interest payments you can claim the interest against other assessable income
  • you can prepay the interest up to 13 months ahead, prior to June 30, which is helpful for cash-flow planning and also allows you to claim the deduction a full year in advance
  • you can defer any capital gains tax liability until the shares are sold
  • as you're geared into the market you will own more shares than if you had paid cash, so you will receive more dividend payments. If the shares are franked then you can offset the franking credits against your assessable income
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