Private ruling: Interest expenses
Published: May 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for all of the interest you incur on your loan? | A1: Yes.

Relevant facts and circumstances: You acquired a joint loan with your spouse to fund the purchase of a share portfolio. The shares have been purchased solely in your name. Your spouse has not and will not assert any ownership interest in the shares. You are required to meet all loan liabilities.

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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 allows you a deduction for any loss or outgoing that is incurred in gaining or producing your assessable income, to the extent that it is not of a private, capital or domestic nature. Whether interest has been incurred in the course of gaining or producing assessable income generally depends on the purpose of the borrowing and the use to which the borrowed funds are put. Taxation Ruling TR 95/25 Income tax: deductions for interest under section 8-1 of the Income Tax Assessment Act 1997 following FC of T v. Roberts; FC of T v. Smith states where a borrowing is used to acquire an assessable income producing asset, or relates to expenses of an assessable income producing activity, the interest on this borrowing is considered to be incurred in the course of gaining or producing assessable income. In your situation, it is accepted the interest is referable to your share investments and is therefore incurred in the production of your assessable income. Accordingly you are entitled to a deduction for all of the interest incurred on the loan.