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Edited version of private advice
Authorisation number: 1052494838194
Date of advice: 19 January 2026
Ruling
Subject: Interest deductions
Question 1
Has the nexus of the funds that was drawn from the two loans and the payment for the residential rental property been retained despite placing the funds into a savings account first before paying the purchase on the same day?
Answer 1
Yes. The redrawn funds were transferred into a saving account and were then used to pay the purchase price for the investment property. As the funds originally came from the redraw facilities, the interest expense still retains sufficient connection with the purchase of the investment property such that it remains deductible.
Question 2
Will interest charges from loan account A be deductible from the date of draw down to the date of the loan payout?
Answer 2
Yes.The interest on the redrawn funds are a loss incurred in the purchase of an investment property used for the production of assessable income and are as such deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The interest will be deductible in the period in which it is incurred (charged to the account).
Question 3
Will interest charges from loan account B be deductible from the date of draw down to DD MM YY?
Answer 3
Yes.The interest on the redrawn funds are a loss incurred in the purchase of an investment property used for the production of assessable income and are as such deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The interest will be deductible in the period in which it is incurred (charged to the account).
This ruling applies for the following period:
Period ended DD MM YY
The scheme commenced on:
DD MM YY
Relevant facts and circumstances
On DD MM YY you accessed the redraw facility of your Base Variable Rate Home Loan (account B) and drew down the amount of $X, transferring this to your Classic Banking account (account C) on the same day.
On DD MM YY you accessed the redraw facility of your Base Variable Rate Home Loan (account A) and drew down the amount of $X, transferring this to your Classic Banking account (account C) on the same day.
On DD MM YY you withdrew the amount of $X from your Classic Banking account (account C) to pay for the purchase of a residential property at Address A.
On DD MM YY settlement of the property took place.
The property was advertised as available for rent immediately and is currently tenanted.
Loan account B had a nil balance at the time of the redraw of $X and at DD MM YY still had a debit balance.
Loan account A had a credit balance at the time of the redraw of $X and the resulting debit was paid in full (had a nil balance) as at DD MM YY.
Relevant legislative provisions
Income Tax Assessment Acct 1997 Section 8-1