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Edited version of private advice
Authorisation Number: 1051679895994
Date of advice: 21 May 2020
Ruling
Subject: Deductions for interest on loan where the loan was used purchase investment shares
Question
Is the interest on a loan used to purchase shares an allowable deduction when the shares have been inherited from a deceased estate?
Answer
Yes. Yes. If you are a beneficiary of a deceased estate you acquire the asset on the day the person died, see QC 52245 for information on deceased estates. Once you have acquired the shares, under Income Tax Assessment Act 1997 section 8-1, you can deduct from your assessable income if it is incurred from producing income.
This ruling applies for the following period:
Year ending 30 June 2020
The scheme commences on:
1 July 2020
Relevant facts and circumstances
Client's partner passed away late 20XX.
Prior to their passing, the deceased person had purchased shares.
The deceased borrowed money to purchase these shares and was claiming the interest from the loan as a deduction in their past income tax returns. The loan was not used for private reasons.
The client was a beneficiary of the deceased's estate and inherited these shares and the outstanding loan.
Relevant legislative provisions
Income Taxation Assessment Act 1997 Division 6-5
Income Taxation Assessment Act 1997 Section 8-1