| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1011955907977
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Rental property - deductions - borrowing expenses
Question
Are you entitled to deduct the once-off fee as a borrowing expense, with the deduction spread over 5 years?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You took out a loan to buy an investment property.
You obtained a discount on the investment loan at a cost. The discount was only available at the start of the loan. The fee was a one-off payment, payable when the loan was being established.
The house was tenanted when you bought it and remained tenanted.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-25.
Reasons for decision
Section 25-25 of the ITAA 1997 allows a deduction for certain borrowing expenses. Where the total borrowing costs exceed $100, the claim must be apportioned over the period of the loan or five years, whichever is the lesser.
Borrowing expenses such as establishment fees, legal expenses, stamp duty on the mortgage, valuation and survey fees associated with the borrowing are deductible to the extent that the borrowed monies are actually or intended to be used during the income year for income producing purposes.
In your situation, you are entitled to claim a deduction, apportioned over 5 years, for the discount fee because it is accepted as being a cost of borrowing money for the purpose of producing assessable income.