Inclusion in the capital gains tax (CGT) cost base of the investment property of interest denied deductibility under a split loan because of Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) (general anti-avoidance rule (GAAR)) is a troublesome issue. It raises fundamental structural issues concerning the effect of the GAAR, the effect of the compensating adjustment mechanisms, and the effect and the relationship between the GAAR, the compensating adjustment mechanisms in Part IVA and other rules in the income tax. This article has come about in response to feedback on a previous article I had written. That previous article was highly critical of a determination (Taxation Determination TD 2005/33) issued by the Australian Taxation Office (ATO) dealing with the inclusion of further interest and compound interest in the cost base of the investment property under a split loan. The ATO’s determination rejected cost base inclusion. The central criticism in that previous article was that the determination was technically flawed. Feedback on the original article raised two issues: (1) Does the application of the GAAR have the effect of setting aside the relevant scheme, or does the GAAR only set aside the relevant tax benefit? And (2) What is the proper order of application of the relevant tax rules in regard to a split loan? The answer to these questions may be determinative of the issue debated here. Regrettably, there is little judicial consideration of these issues in the authorities. This article has two main parts. Section 1 deals with the effect of the GAAR operating in regard to a scheme. Section 2 deals with the order in which relevant tax rules apply. As a matter of policy, the further interest and the compound interest under a split loan should not be included in the cost base of the investment property. However, the conclusion in this article is that, unless the ATO can make the GAAR apply to the further interest and the compound interest as a tax benefit in the form of cost base inclusion ‐ something the ATO has not yet asserted let alone analysed ‐ cost base inclusion is very unlikely to be defeated.