Private ruling: Rental deductions
Date of advice: 24 February 2025
Published: 7 April 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for the loan interest on your ownership interest in the property when it becomes a rental property? | A1: Yes Based on the information provided to the Commissioner you are entitled to claim a deduction on the loan you take out to purchase your spouse's property when it is used as a rental property. The interest on the loan will have the relevant connection to the earning of assessable income to enable you to claim a deduction for the loan under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Relevant facts and circumstances: You and your spouse live at the property as your main residence. The property is owned solely by your spouse at present. Your spouse intends on selling a portion of their share in the property to you and they will retain the remaining portion. The portion of the property will be sold to you at the market value on the day of the transfer. You will take out a loan which will be a principal and interest investment loan, on a standard variable interest rate. You and your spouse intend on renting the property out. You and your spouse will then move to another property which is currently being rented out and owned by you and your spouse. Your spouse will direct the proceeds of the sale to you and pay down the loan on the other property.

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