ATO Interpretative Decision
ATO ID 2001/257 (Withdrawn)
Income Tax
Deductibility of interest and fees on moneys borrowed to make superannuation contributions.FOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision. It also refers to a repealed provision of the ITAA 1936 which has been replaced by section 26-80 of the ITAA 1997.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are interest and fees incurred on money borrowed to make superannuation contributions allowable deductions under either section 8-1 or section 25-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No, the interest and fees incurred on money borrowed to make superannuation contributions are not allowable deductions under either section 8-1 or section 25-25 of the ITAA 1997.
Facts
The taxpayer borrowed money against rental properties jointly owned by themselves and their spouse, to make superannuation contributions for the purpose of providing superannuation benefits for themselves and their spouse.
Reasons for Decision
Section 8-1 of the ITAA 1997 allows a deduction for interest to the extent to which it is incurred in gaining or producing assessable income or is necessarily incurred in carrying on a business for that purpose. Section 8-1 of the ITAA 1997 does not allow a deduction if another provision of the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936) prevents a deduction.
The deductibility of interest is determined by the use for which the borrowed money is intended (Taxation Ruling TR 95/25) and not by the security given for the borrowed money (Taxation Determination TD 93/13).
Section 25-25 of the ITAA 1997 allows a deduction for expenditure incurred in borrowing money to the extent that the money is used for the purpose of producing assessable income.
Subsection 67AAA(1) of the ITAA 1936 denies a deduction for interest and other borrowing expenses incurred in relation to a loan or other financing arrangement that was entered into after 18 August 1992 and which was used to finance personal superannuation contributions.
As the borrowed moneys will be used by the taxpayer to make superannuation contributions to provide superannuation benefits for themselves and their spouse, subsection 67AAA(1) of the ITAA 1936 denies a deduction for the interest and fees which may otherwise be deductible under either section 8-1 or section 25-25 of the ITAA 1997.
The fact that the taxpayer will use the rental properties as security for the borrowed money does not make the interest and fees incurred on these money deductible against their rental income.
Date of decision: 19 July 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
section 25-25
subsection 67AAA(1)
Related Public Rulings (including Determinations)
TR 95/25
Keywords
Interest expenses
Expenses of borrowing
Rental property
Superannuation
ISSN: 1445-2782
| Date: | Version: | |
| 19 July 2001 | Original statement | |
| You are here | 1 April 2010 | Archived |
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