Private ruling: Rental deduction for interest on loans
Date of advice: 17 April 2020
Published: June 2020
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim deductions for the interest expenses on your property loans? | A1: Yes. For the reason you have given you can claim deductions for the interest on your property loans. For property A from the date you changed your main residence to property B and for property A until the date construction was completed.

Relevant facts and circumstances: You and your spouse were residing at property A. The property was your main residence. You decided to buy land (property B) for the purpose of constructing an investment property. The purchase of the land was settled with a bank loan and some savings. You approached a bank for a construction loan for building a house on the land at property B. The bank agreed to the loan. You have supplied copies of the loan agreements for the land and for the construction. The loan agreement for the construction loan clearly indicates that the purpose of the loan is for investment. The construction of the dwelling at property B was completed and handed over to you by the builder. At this time you obtained a rental appraisal from a real estate agent (a copy has been supplied). Upon completion of property B you decided to change your main residence from property A to property B. The change of main residence occurred. Property A was vacant until it was advertised for rent. Tenants occupied property A. You want to claim a deduction for the interest on the property A loan from the date you changed your main residence from property A to property B. The interest deduction claim would arise in the income year and subsequent years; until repayment is completed. You want to claim the interest on the property B loan till the date of completion of construction.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1