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Edited version of your private ruling
Authorisation Number: 1012553395803
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Ruling
Subject: Expenses - investment
Question
Are you entitled to a deduction for the interest expenses in respect of borrowed funds used to buy shares?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
You have an existing loan in your name which funded the acquisition of shares held in your name.
You have incurred but not paid any of the interest.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
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.
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.
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 the interest incurred on the loan in the 2012-13 financial year.