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Edited version of private advice
Authorisation Number: 1051618307742
Date of advice: 13 December 2019
Ruling
Subject: Deductibility of interest - investment loan
Question
Are you entitled to a deduction for the interest expenses on your line of credit used only for your investment properties?
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commenced on
1 July 2019
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You own two investment properties. You have a loan for each of the properties with principal and interest repayments.
You have a line of credit used to pay for renovations, repairs and maintenance on the investment properties and to make the principal and interest repayments on the investment loans.
You use your available funds that would otherwise be used to make the repayments on the investment loans for private purposes.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Does Part IVA apply to this ruling?
Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.
We have not fully considered the application of Part IVA to the arrangement you have asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. However we note that your arrangement shows features which are similar to those examined in Taxation Determination TD 2012/1.
TD 2012/1 considers how the general anti-avoidance provisions would apply to certain investment loan arrangements. You may wish to review TD 2012/1 (which is available on our website www.ato.gov.au ) and consider its relevance to your situation.
For more information on Part IVA, go to our website and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.