Private ruling: Rental property - deductions - borrowing expenses
Published: September 2011
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to deduct the once-off fee as a borrowing expense, with the deduction spread over 5 years? | A1: Yes

Relevant facts and circumstances: You took out a loan to buy an investment property. You obtained a discount on the investment loan at a cost. The discount was only available at the start of the loan. The fee was a one-off payment, payable when the loan was being established. The house was tenanted when you bought it and remained tenanted.

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 certain borrowing expenses. 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, you are entitled to claim a deduction, apportioned over 5 years, for the discount fee because it is accepted as being a cost of borrowing money for the purpose of producing assessable income.

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