Private ruling: Interest income and expenses
Published: June 2012
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: I s the interest derived from the proceeds of the sale of your principal place of residence exempt from tax for the period between the sale of the property and the purchase of your new residence as all the money was used for the purchase of your new principal place of residence? | A1: No | Q2: Are you entitled to a deduction for rent expenses and storage of furniture expenses incurred during the period between the sale of the original residence and the purchase of your new principal place of residence? | A2: No


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-20 | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 Division 11A

Reasons for decision: Summary: Interest income Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are a resident of Australia, your assessable income includes all the ordinary or statutory income, derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Regardless of the source of the funds that derive the interest, interest income is assessable as ordinary income. Section 6-20 provides for amounts of ordinary income to be exempt if it is excluded from being assessable income or is made exempt by a provision in the Income Tax Assessment Act 1936 or the ITAA 1997 or another Commonwealth law. Division 11A of the ITAA 1997 lists classes of exempt income for the purposes of the Act. Interest income is not covered in this Division. While the proceeds from the sale of your principal place of residence are exempt as assessable income under section 6-5 of the ITAA 1997 and also the capital gains tax provisions, income derived from the sale proceeds, such as the interest income, is assessable as ordinary income under section 6-5 of the ITAA 1997. There is no provision in the ITAA 1936 or ITAA 1997 that provides for the exemption of interest income being derived from the proceeds of the sale of a taxpayer's principal place of residence. Deductions Section 8-1 of 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. For an expense to be incurred in gaining or producing assessable income, it must be directly relevant to the person's income earning activities and have the essential character of an income producing expense. In determining if a loss or outgoing incurred by a taxpayer is deductible depends on all the facts and matters relating to the loss or outgoing incurred by the taxpayer. Expenses you incurred for rent and storage of furniture are personal expenses and as such are specifically excluded from being deductible expenses under section 8-1 of the ITAA 1997. Accordingly, you are not entitled to a deduction for these expenses.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts and circumstances | You sold your principal place of residence in late 2009. | Prior to the sale, you commenced searching for another residence but did not locate a suitable one until early 2010. | During the period late 2009 until early 2010, the proceeds from the sale of your principal place of residence derived bank interest. | The total proceeds were used for purchasing your replacement principal place of residence. | You incurred expenses for rent for temporary accommodation and fees charged by a storage facility for the storage of furniture items that could not be taken to your temporary accommodation. You incurred these expenses during the period between late 2009 and moving into your new home.