Private ruling: Deductions
Date of advice: 5 May 2016
Published: June 2016
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Are you entitled to a deduction for interest on your credit card? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You used your private credit card to pay expenses associated with a business. There was no written agreement between you and the trust to use your own private credit card. You purchased stock with the credit card and paid the rates and utilities bills. The business was carried on through a discretionary trust. You were the director of the corporate trustee and beneficiary of the trust. The business has now ceased.

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 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation ruling 2004/4 (TR2004/4) at paragraph 10 states: Where interest has been incurred over a period after the relevant borrowings (or assets representing those borrowings) have been lost to the taxpayer and relevant income earning activities (whether business or non-business) have ceased, it is apparent that the interest is not incurred in gaining or producing the assessable income of that period or any future period. However, the outgoing will still have been incurred in gaining or producing 'the assessable income' if the occasion of the outgoing is to be found in whatever was productive of assessable income of an earlier period. In this case the interest was incurred by you on your private credit card. The income derived by the business was not derived by you as an individual taxpayer, it was derived by the trust as the business belonged to the trust and was not your business. Therefore the interest you have incurred cannot be deducted by you. You are not entitled to a deduction of interest on your private credit card under section 8-1 of the ITAA 1997.