ARTICLE · 08 JUNE 2004

The Last Word on Split Loans?

Solicitor

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The High Court in Australia has finally made its decision in the case of Commissioner of Taxation v. Hart reversing the decision of the full Federal Court delivered in July 2002. The High Court decision is a fatal blow to the use of a split loan to purchase a home and an investment property .

AustraliaTax

Anton Joseph

The High Court in Australia has finally made its decision in the case of Commissioner of Taxation v. Hart¹, reversing the decision of the full Federal Court delivered in July 2002. The High Court decision is a fatal blow to the use of a split loan in a particular manner to purchase a home and an investment property. (See previous related article of 8 August 2002 - "Hart of the Matter - the Role of Split Loans" by clicking on the "Next Page" link at bottom of this article). The loan provided by the lending institution that came under scrutiny was aptly called the "wealth optimiser".

The relevant section of the loan agreement stated as follows:

"While the Loan Amount is split into loan accounts:

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