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Edited version of private advice
Authorisation Number: 1052166807536
Date of advice: 8 September 2023
Ruling
Subject: Rental deductions
Question
Are you entitled to a deduction for the interest on the investment property loan?
Answer
Yes.
Based on the information provided to the Commissioner you are able to claim a deduction for the interest on the investment loan when you withdraw funds from the offset account to purchase a main residence.
The nature of the original borrowing has not changed from that of an investment loan.
The interest is therefore deductable under Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).
This ruling applies for the following period:
Year ending 30 June 2024
The scheme commenced on:
1 July 2023
Relevant facts and circumstances
You and your spouse have an investment property.
You and your spouse have an interest only loan on the investment property.
The loan has an offset account which covers 100% of the loan.
There were no interest charges to be claimed against the property in the relevant financial year.
Funds are expected to be withdrawn from the offset account to purchase a main residence, which will trigger the resumption of interest charges on the investment property loan.
The investment property loan amount remains unchanged at all times (it does not have a redraw facility, and no principal has been paid off to date)
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1