Private ruling: Deductions - split loan
Date of advice: 19 November 2025
Published: 12 January 2026
Ruling period: Year ended in 20XX
Date scheme commenced: XX XX 20XX

Ruling: Q1: Are you and your partner entitled to claim a deduction for the interest expenses incurred on part of the owner-occupied loan, that was redrawn and used to purchase shares that are income producing under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes, Taxation Ruling TR 2000/2 Income tax: deductibility of interest on moneys drawn down under line of credit facilities and redraw facilities considers the deductibility of interest incurred by borrowers on money drawn down under line of credit facilities and loans offering redraw facilities. It considers the operation of section 8-1 of the ITAA 1997 where the borrowed money has been applied for both income producing and non-income producing purposes. The ruling establishes drawing excess funds from a loan account is treated as a new loan. The purpose or use of the drawing is relevant. That is, the deductible portion of interest when further borrowings are made depends on the use the redrawn funds are put to. This is independent to the purpose of the original borrowing.

Relevant facts and circumstances: You and your partner jointly own your home and jointly hold a P&I owner occupied loan against your home. On XX of XX 20XX, you deposited $XX into your home loan from your attached offset 1. On XX of XX 20XX, you deposited another $XX into your home loan from your attached offset 1. On XX of XX 20XX, you purchased $XX worth of ETF shares that paid dividends. On XX of XX 20XX, you redrew $XX into your attached offset 2 for the purpose of purchasing the listed shares. On XX of XX 20XX, you transferred $XX into the brokerage account and settlement of the shares was completed on the XX of XX 20XX. You and your partner wish to deduct the interest of your owner-occupied loan, in so far as it relates to the income producing portion of the loan that was redrawn.

Relevant legislative provisions: Income Tax assessment Act 1997 section 8-1 | Income Tax assessment Act 1997 section 6-5 Taxation Ruling 93/32 | Taxation ruling 95/25 | Taxation Ruling 98/22 | Taxation Ruling 2000/2 | Taxation Ruling IT 2606