Private ruling: Rental deductions - loan interest
Date of advice: 27 November 2018
Published: March 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for a portion of the interest expense on a redrawn amount used to purchase an investment property? | A1: Yes. The portion of the interest expenses incurred are directly related your investment property, and are deductible. Further information about rental property expenses can be found by searching 'QC 55249' on ato.gov.au

Relevant facts and circumstances: In 20XX you borrowed funds from an Australian Financial Institution to assist with the acquisition of an investment property which was to be owned solely in your name. The loan was secured by a different property which was owned by you at the time. The loan was advanced during mid 20XX. The whole of the loan proceeds less a small amount of bank charges were deposited into a loan offset account in your name at the time the loan was advanced. The proceeds of the loan advance remained in the offset account for a short period until most of the funds were withdrawn to settle on the new investment property. Regarding the funding required for the settlement, most of the funds were withdrawn from the offset account, and you also used some of your own funds. As such, there was a balance remaining in the offset account after the settlement of the investment property took place, which has not been used for any other purpose, and has been set aside for further investment costs primarily associated with the investment property. As such, a high percentage of the loan advance relates to the investment property.

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