Private ruling: Rental property deductions
Date of advice: 17 October 2024
Published: 25 November 2024
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for the loan interest on the construction of a rental dwelling prior to it being available for rent? | A1: Yes. Based on the information provided to the Commissioner you can claim a deduction for the interest on the loan used to construct the investment dwelling. You initially took out a loan to purchase a block of land with the intention of constructing a dwelling, for rental purposes, as an investment. You took out a separate loan a couple of years later to construct the investment dwelling. The expected date of completion of the construction of the investment dwelling is in a future year and you will rent the property upon completion. The interest on the loan relating to the construction of the rental dwelling is an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 prior to the investment property being available for rent.

Relevant facts and circumstances: You purchased a block of land. You took out a loan to purchase the block of land. It is your intention to build a residential dwelling, for investment purposes, on the land. The property will be rented once the construction is completed. You took out a separate loan to build the investment dwelling, on the land. The expected completion date of the investment dwelling's construction is in a future year. You will rent the property once the construction, of the investment dwelling, has been completed. You are aware that you cannot claim a deduction for the interest on the loan related to the purchase of the block of land.

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