Private ruling: Rental property expenses
Published: May 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | The scheme commenced on | 1 July 2012

Ruling: Q1: Are you entitled to a deduction for your share of interest incurred the on the line of credit for the portion referable to the payment of your deductible rental expenses? | A1: 


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. Where interest accrues periodically on a mixed purpose line of credit facility, the deductibility of accrued interest is determined by considering the application of the borrowed funds for income producing and non-income producing purposes. The portion of the line of credit attributable to your property is directly relevant to the earning of assessable income. As such you are allowed a deduction for this portion under section 8-1 of the ITAA 1997.

Relevant facts: You purchased a rental property in 2XXX's. | You set up a line of credit facility around the same time, in joint names with your spouse. | Since that time, the line of credit has been your sole bank account, where all salary and private income goes as well as assessable rental payments. | All expenses both private and those related to the rental property are paid from the line of credit. | The line of credit has operated with a debit balance for most of the time, and interest has been paid to the bank every month.