Private ruling: Rental property - interest deduction
Date of advice: 26 September 2024
Published: 4 November 2024
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Are you entitled to a deduction for interest incurred on an investment loan prior to the property being genuinely available for rent? | A1: Yes. Based on the information provided to the Commissioner you can claim a deduction for the interest incurred on an investment loan for a property prior to it being rented. The Commissioner is satisfied it was your intention from the purchase of the property to rent it out and you are carrying out repairs to make it habitable and to obtain a higher rent. The property is not being used for any private purposes.

Relevant facts and circumstances: You purchased the property as an investment property. Contracts for the property were exchanged and the property settled in the following month. You obtained an investment loan and were required to have a rental assessment for this loan prior to it being approved. You received a rental appraisal for the property prior to the exchange of contracts. The property was purchased with defects which are mostly capital in nature. The defects are: • sewerage blocked. • water heater leaking and needs replacing. • most taps leaking. • no water saving devices. • carpet needs replacing • cracks in gyprock • roof leaking. • whole interior needs painting. • old stove broken and needed replacing. • electrical metre box unsafe not up to code. You intend on having the property genuinely available for rent later this year. The property has not been used for private purposes.

Relevant legislative provisions: Income tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-25