Private ruling: Rental deductions
Date of advice: 8 September 2023
Published: 16 October 2023
Ruling period: Year ending 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Are you entitled to a deduction for the interest on the investment property loan? | A1: Yes. Based on the information provided to the Commissioner you are able to claim a deduction for the interest on the investment loan when you withdraw funds from the offset account to purchase a main residence. The nature of the original borrowing has not changed from that of an investment loan. The interest is therefore deductable under Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Relevant facts and circumstances: You and your spouse have an investment property. You and your spouse have an interest only loan on the investment property. The loan has an offset account which covers 100% of the loan. There were no interest charges to be claimed against the property in the relevant financial year. Funds are expected to be withdrawn from the offset account to purchase a main residence, which will trigger the resumption of interest charges on the investment property loan. The investment property loan amount remains unchanged at all times (it does not have a redraw facility, and no principal has been paid off to date)

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