Private ruling: Deductions for interest expenses - rental property
Date of advice: 16 November 2023
Published: 8 January 2024
Ruling period: Year ended XX XXXX 20YY | Year ended XX XXXX 20YY | Year ended XX XXXX 20YY
Date scheme commenced: XX XXXX 20YY

Ruling: Q1: Can you claim a deduction for interest accrued on a loan for a rental property under section 8-1 of the Income Tax Assessments Act 1997 ? | A1: Yes. The consent orders expressly state that you were required to make a significant payment to your former spouse in return for their interest in the property. Upon acquiring this interest in property, you converted the property into a rental property, subject to a loan that you acquired to make the required payment to your former spouse. The interest expenses you will incur relate to a rental property and will be deductible. Further information about rental property expenses can be found by searching 'QC 23635' on ato.gov.au

Relevant facts and circumstances: You and your former spouse owned the property as tenants in common with equal shares. Following the breakdown of your relationship with your former spouse you reached a financial settlement on XX XXXX 20YY. The consent orders required you to make a significant payment to your former spouse in return for their equal share of the interest in the relevant property. On XX XXXX 20YY, the property was listed as available for lease and tenants were acquired. On XX XXXX 20YY, the loan with the financial institution was drawn down to make the required payment to your former spouse, while your former spouse also completed a transfer of their equal share of interest in the property to you.

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