Private ruling: investment loan interest
Published: January 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to claim all of the interest on a loan used to finance the purchase of your share of a jointly owned investment property? | A1: Yes.

Relevant facts and circumstances: You are a joint owner of a rental property. You have a loan in your name only which was used to purchase your share of the property.

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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Generally rental income and expenses must be attributed to each co-owner according to their legal interest in the property. However interest on money borrowed by only one of the co-owners which is exclusively used to acquire that person's interest in the rental property does not need to be divided between all of the co-owners. In your case, you have a loan which was used solely to finance the purchase of your share of an investment property. Therefore, you are entitled to claim all of the interest on the loan while the property is available for rent.

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