Line of Credit and Tax Consequences

I'm starting to look into this loan option known as the Line of Credit (LoC).

So far I found these websites
http://www.pwafinancial.com.au/index.php/resources/latest-news/122-deductible-interest.html

 

It gives a clear warning about using a LoC, originally for a property investment, then later use part of it for other investments. The tricky part is that any repayment may actually reduce the tax deductibility of the interest payments. Examples are given in the article.

http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20002/NAT/ATO/00001

This is the official Australian tax ruling of how LoC are to be treated and implications for deductibility of interest on the loan.

More to come.....