Retrospectively Restructuring Investment Loans

🔄 Retrospectively Restructuring Investment Loans

Sometimes investors realise—years later—that their loans were never structured correctly.
And naturally, the question comes up:

“Can I change my loan structure now and make the interest deductible?”

Here’s the simple truth, explained clearly.

❌ Past Borrowing Purpose Cannot Be Changed

The deductibility of interest is always tied to what the borrowed money was originally used for, not what the loan is called today.

If the funds were used for:

Private spending

A home purchase

Personal debts

…then that portion of interest will always remain non-deductible, no matter how the loan is renamed or reshuffled later.

🔹 Key Principles to Understand
1️⃣ Past use determines deductibility

Only borrowings that originally funded income-producing investments can generate deductible interest.

2️⃣ Renaming or restructuring doesn’t change history

Splitting a loan, refinancing it, or calling it an “investment loan” after the fact does not make old private debt deductible.

3️⃣ Mixed-purpose loans must stay true to their original split

If a loan funded both private and investment purposes, only the actual investment portion can be claimed — based on original use, not later adjustments.

4️⃣ Refinancing doesn’t wipe the slate clean

A refinance simply continues the character of the old debt:

Private portion stays private

Investment portion stays investment

✔ What You Can Do Going Forward

While the past cannot be changed, you can improve the structure for the future by:

Creating separate clean splits

Avoiding mixing private and investment borrowings

Borrowing correctly for future investments

Keeping clear records of how funds are used

Good structuring now prevents deduction issues later.

⭐ Summary

You cannot make old private debt deductible.

Only the original purpose of the borrowing matters.

Restructuring helps going forward, not backwards.

Keep private and investment borrowing separate to protect future deductions.
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