Private ruling: Deductions - rental property -interest
Date of advice: 28 August 2024
Published: 8 October 2024
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim a full interest deduction under section 8-1 of the Income Tax Assessment Act 1997 for the period post the Property being available for rent? | A1: Yes. It is accepted that all of the interest is deductible as the expense was incurred in the course of gaining or producing income and the mistaken transaction will not stop the full amount of interest being deductible.

Relevant facts and circumstances: You entered into a contract to purchase a property (the Property). You undertook activities to source a loan in relation to the purchase of the Property. You accepted a loan offer from a banking institution (the Bank) for a specified amount (the Loan), with a loan account (Loan Account) and an offset account (Offset Account). Settlement on the purchase of the Property occurred and the Loan was fully drawn. Around the settlement date you had amounts deposited in your savings accounts. On the settlement date on the purchase of the Property you used your phone to transfer an amount (Amount X) from one of your savings accounts into the Loan Account, reducing the balance owing by the equivalent value of Amount X. However, your intention had been to deposit Amount X into the Offset Account. You contacted the Bank on the same day to advise them that the transfer of Amount X into the Loan Account was an error, with you seeking to void the transaction. The Bank indicated that the transfer could not be cancelled. On the same day you attempted to reverse the transaction by transferring an amount equivalent to Amount X from the Loan Account into your savings account and then transfer the same amount from the savings account into the Offset Account. You lived at the Property after it was purchased for a period until you commenced using it for rental purposes.

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