Private ruling: Rental deductions
Date of advice: 25 February 2026
Published: 20 April 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: D M 20XX

Ruling: Q1: Are you entitled to interest deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the full amount of interest charged on the funds borrowed? | A1: Yes ATO ID 2004/425- Income Tax Capital gains tax: deceased estate - cost base of CGT asset - fourth element states:The costs incurred to settle the dispute, including the legal fees paid in respect of the dispute, form part of the cost base of the estate's asset under subsection 110-25(5) of the ITAA 1997. You borrowed money to finance the legal fees to contest the deceased estate. The only asset you inherited was the property. The property was rented. You also borrowed money to repay the existing loan on the property as well as for renovations to the property. If borrowed money is used to acquire an income producing property, the associated interest expenses are deductible. While the property is rented, or genuinely available for rent, you may also claim interest charged on loans taken out for repairs and for renovations.

Relevant facts and circumstances: You provided a copy of the will. According to the will the children of the deceased, were entitled to the residue of the estate. The will was deemed invalid as the deceased had remarried and separated by time of death. Letters of Administration with the Will Annexed were granted. The basis of the grant was the executor and substituted executor renounced probate. The Letters of Administration with the Will Annexed entailed an attached inventory. The inventory list included a property. You contested the estate and eventually obtained the property. Your only inheritance was the property. The property had an outstanding loan. You refinanced the loan. The property was rented on D M 20XX. You provided a copy of the Offset Home Loan Statement. You paid out the existing loan on the property in the name of the deceased. You paid the solicitor costs in contest of the estate. You provided a copy of the solicitor's Statement. The balance of the loan was deposited into a "rental" account to pay for renovations and ongoing costs. The rental account is a joint offset account. You are joint signatories on the account. You spent borrowed funds on renovations which included a bathroom, deck and retaining wall renovations and repairs.

Relevant legislative provisions: Income Tax assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subsection 110-25(5 )