Private ruling: Interest Expenses - Share investments
Published: August 2013
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a deduction for all the interest incurred on the loan? | A1: Yes

Relevant facts and circumstances: You have an existing margin loan in your name which funded the acquisition of shares held in your name. You have an existing home which has an amount available for redraw under a new sub-account. You will refinance your existing margin loan into the new sub-account. You will refinance in order to take advantage of reduced interest rates, relative to your existing margin loan.

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 allows you a deduction for any loss or outgoing that is incurred in gaining or producing your assessable income, to the extent that it is not of a private, capital or domestic nature. Whether interest has been incurred in the course of gaining or producing assessable income generally depends on the purpose of the borrowing and the use to which the borrowed funds are put. Where a borrowing is used to acquire an assessable income producing asset, or relates to expenses of an assessable income producing activity, the interest on this borrowing is considered to be incurred in the course of gaining or producing assessable income. The character of a new loan which refinances a previous loan follows from that previous loan: Taxation Ruling TR 95/25 In your situation, it is accepted the interest is referable to the share investments and is therefore incurred in the production of your assessable income. Accordingly you are entitled to a deduction for the interest incurred on the loan.