A couple (the Blarts) were advised by their financial planner to buy an investment property and to pay all their loan repayments only against the loan they had for their private property and to let the interest on the investment loan capitalise and thereby to let the balance of the loan on the investment property continue to increase as this would then provide for them additional deductions. Is this arrangement likely to be disallowed under the provisions of Part IVA of the Income Tax assessment Act 1936?

a) Yes. This is an example of tax avoidance

b) Yes. This is an example of tax evasion

c) Yes. This is an example of a sham

d) No as the taxpayers have no subjective intent to avoid tax

Answer is not (d).