| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012300372776
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: interest expenses
Question
Are you entitled to a deduction for 100% of the interest expense on a jointly owned line of credit used to purchase an investment property?
Answer
No
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You intend on purchasing an investment property in your name only.
You will be using a line of credit that is in joint names to partially fund the purchase of the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
Interest paid on a mortgage over a rental property is considered an allowable deduction for the purposes of section 8-1 of the ITAA 1997.
Where two taxpayers borrow jointly, both taxpayers will have presently existing pecuniary liability to discharge interest on that borrowing once it accrues and is due and payable: paragraph 6 of Taxation Ruling TR 97/7. Therefore, each of the borrowers will only incur their share of the interest expense, notwithstanding circumstances where one borrower may meet all repayments in respect of the borrowing: paragraph 6 of Taxation Ruling TR 97/7.
Thus, in line with TR 97/7, you will only be entitled to a deduction for your share of the interest on the line of credit.