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Edited version of your written advice
Authorisation Number: 1051452660671
Date of advice: 09 November 2018
Ruling
Subject: Rental property interest deductions
Question
Is the interest on investment loans deductible?
Answer
Yes. Under the provisions of section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income. However, you cannot deduct a loss or outgoing to the extent that it is of a capital, private or domestic nature.
If a loan is taken out to purchase or refinance a rental property, the interest charged on that loan, or a portion of the interest, can be claimed as a deduction. The property must be rented, available for rent, or intended to be rented in the immediate future, in the income years for which the deduction is claimed. Rental deductions can be claimed against the receipt of rental income as expenses incurred in earning assessable income under section 8-1 of the ITAA 1997.
I refer you to our guide Rental Properties 2018 which details how to treat income and expenses for an investment property.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
● You have two rental properties, Property A and Property B.
● You have three investment loans for these properties.
● The security for these loans also includes your main residence.
● In May 20XX you sold Property A.
● You were required to repay one of the loans to facilitate the sale of the property.
● You have refinanced your loans, there are now two loans.
● The security for the new loans is Property B and your main residence.
● You advise that the loans are solely for investment purposes and not private in nature.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1.