Private ruling: Rental deductions
Date of advice: 12 September 2024
Published: 21 October 2024
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 2020

Ruling: Q1: Are you entitled to a deduction for the loan interest on the construction of a rental property prior to it being available for rent? | A1: Yes. Based on the information provided to the Commissioner you can have a deduction for the interest on the portion of the loan used to construct the rental property. You purchased a house and land package. You are drawing down on the loan taken out for the house and land package to construct the rental property. You can apportion the loan interest and claim a deduction for the portion of the loan interest relating to the construction of the rental property prior to the property being available for rent. You can include the amount in a rental schedule in the return. The interest on the portion of the loan relating to the construction of the rental property is an allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997 . Section 26-102 of the ITAA 1997 does not prevent you from claiming a deduction for the portion of the interest on the loan used to construct the rental property.

Relevant facts and circumstances: You purchased a house and land package. You intend building a rental property on the land. You took out a loan to purchase the land and has subsequently been drawing down on the loan to pay for the construction of the home. You understand that interest costs for holding vacant land are not deductible until the property is available for rent and should be added to the cost base. You can separate the interest between the purchase of the land and the construction costs.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 26-102