Private ruling: Rental deductions - interest
Date of advice: 19 April 2024
Published: 27 May 2024
Ruling period: Year ended XX XXXX 20YY
Date scheme commenced: XX XXXX 20YY

Ruling: Q1: Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the deductibility of Loan A, in place of Loan B2, whether in full or apportioned? | A1: Yes. You are entitled to claim the interest deductions subject to the apportionment rules.

Relevant facts and circumstances: You are an Australian Resident Taxpayer. You owned three residential properties, referred to as "Property A", "Property B" and "Property C". Property A was the first property purchased and it became your principal place of residence (PPR) until Property B was purchased. Loan A is associated with Property A. Loan A has been refinanced multiple times during the ownership of Property A, the latest time Loan A was refinanced was XXX XXXX. Property B was the second property purchased and it became your PPR until Property C was purchased. Loan B1 is associated with Property B. Property A commenced being a rental property after Property B became PPR. In XXX XXXX, Loan B1 was split by the lender in a restructure/refinance of the loan which gave rise to Loan B2. Loan B1 was a variable loan and Loan B2 was a fixed loan. Property C was the third property purchased and it became your PPR from the time Property B became a rental. Loan D was obtained to purchase Property C Property B commenced being a rental property after Property C became your PPR. In XXX XXXX, Loan B1 was refinanced to Loan C. Loan B1 ceased to exist following the beforementioned refinance. Loan C is associated with Property B. On XX XXX XXXX, Property A was sold. On XX XXX XXXX, Property A settled. The proceeds from the sale of Property A were incorrectly applied by the lender against Loan B2 and the balance against Loan D. The proceeds were meant to be applied against Loan A, which was associated with Property A. It was against your intention for the proceeds to be applied against Loan B2 and the balance against Loan D. Following the sale transaction Loan B2 ceased to exist as the loan was fully repaid and Loan D was reduced by the balance of proceeds. Loan C remains in existence. Loan A remains in existence. Loan D remains in existence. Property B remains a rental property. Property C is still your PPR. All loans were cross collateralised.

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