Private ruling: Rental deductions
Published: February 2015
Ruling period: Income year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the expenses incurred in obtaining a statement of advice from a financial planner for the purpose of borrowing money to purchase a rental property deductible as a borrowing expenses under section 25-25 Income Tax Assessment Act 1997 (ITAA 1007)? | A1: Yes

Relevant facts and circumstances: During the 20XX year you entered into a limited recourse borrowing arrangement, the purpose of which was to purchase a rental property. The financier was X Bank. Once of the conditions of the bank providing the loan to you was that the fund obtained a 'Certificate of Financial Advice' satisfactory to the bank. You engaged the services of financial planner to prepare the statement of advice on your behalf. You were granted the loan and have subsequently rented out the property that was purchased.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-25

Reasons for decision: Summary: Section 25-25 of the ITAA 1997 allows a deduction for expenditure you incur for borrowing money, to the extent that you use the money for the purpose of producing assessable income. Where the total borrowing costs exceed $100, the claim must be apportioned over the period of the loan or five years, whichever is the lesser. Borrowing expenses such as establishment fees, legal expenses, stamp duty on the mortgage, valuation and survey fees associated with the borrowing are deductible to the extent that the borrowed monies are actually or intended to be used during the income year for income producing purposes. In your situation it is accepted that the expense was incurred for the sole purpose of securing loan approval for a rental investment property, consequently you are entitled to claim a deduction, apportioned over 5 years, for the expenses incurred seeking the financial advice.