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Edited version of private advice
Authorisation Number: 1052161529751
Date of advice: 18 September 2023
Ruling
Subject: Interest deductions
Question
Are you entitled to a partial deduction on the interest payable on your home loan if you used a redraw to purchase shares?
Answer
Yes. The interest attributable from a redraw being used to acquire an income producing asset like shares can be deducted. You must apportion the interest expenses to not include any part of the home loan that is not used for income producing purposes. You must also apportion the interest deductions according to your ownership of the asset.
The method of calculations for the apportionment going forward are prescribed in TR 2000/2 at paragraph 20. You can also go to our website ato.gov.au and type in QC 23635 into the search for more information.
The time limit to amend your income tax return is two years from the date listed on the notice of assessment. If you want to amend a tax return after the time limit has passed, you may be able to lodge an objection. While the time limit for lodging amendments and objections is the same, you can request an extension of time to lodge an objection in some circumstances.
For more information go to our website ato.gov.au and type in QC 33803 into the search bar for more information.
This ruling applies for the following periods:
1 July 20XX to 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You have two home loans (Loan).
Loan 1 is on a variable rate. Loan 2 is on a fixed interest rate.
You and your spouse are both listed on both Loans and you both have 50% ownership interest.
The Loan has a redraw facility.
On several occasions you have used a redraw to take out an amount from the Loan, and then use that amount to pay for shares in both your name and your spouse's name.
You provided a spreadsheet that provides details on the amount and dates of the redraws, and provides details on the number, type, dates, owner and total cost of the shares you both acquired. These transactions refer mainly to the 202XX and 20XX financial years although some of them relate to the 20XX financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1