Private ruling: Rental deductions
Date of advice: 27 October 2023
Published: 11 December 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 2022

Ruling: Q1: Are the interest expenses on all loans, used to purchase your investment properties, deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) | A1: Yes. In your case, the interest expenses were incurred on funds borrowed to purchase your investment properties. Furthermore, there is no private or domestic purpose to these properties. The Commissioner is satisfied that the interest on all loans has the relevant connection to income earning activity, as these funds were used to purchase your investment properties, which continue to be income producing. Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for interest expenses incurred, for all loans, in relation to the purchase of your investment properties.

Relevant facts and circumstances: You purchased a number of investment properties during the relevant financial year. Both properties are used 100% for income producing activity. The plans to structure the finance of these investments were that each property would have a number of loans each and these loans would be kept separate for each property. More than one loan was required for each property due to lending requirements of the bank The idea was that each property would have its own loans that are separately identifiable and the interest claims against these investment properties would be clear to follow. When the bank executed the settlement, both properties settled simultaneously, and a number of incorrect transactions took place. Money was drawn down into your own personal account (from loans attached to each respective investment property), which were in turn recontributed into a loan account (attached to one property only), which were then draw down for the settlement of all investment properties.

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