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Edited version of private advice
Authorisation Number: 1052319744731
Date of advice: 17 October 2024
Ruling
Subject: Rental property deductions
Question
Are you entitled to a deduction for the loan interest on the construction of a rental dwelling prior to it being available for rent?
Answer
Yes.
Based on the information provided to the Commissioner you can claim a deduction for the interest on the loan used to construct the investment dwelling.
You initially took out a loan to purchase a block of land with the intention of constructing a dwelling, for rental purposes, as an investment.
You took out a separate loan a couple of years later to construct the investment dwelling.
The expected date of completion of the construction of the investment dwelling is in a future year and you will rent the property upon completion.
The interest on the loan relating to the construction of the rental dwelling is an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 prior to the investment property being available for rent.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You purchased a block of land.
You took out a loan to purchase the block of land.
It is your intention to build a residential dwelling, for investment purposes, on the land. The property will be rented once the construction is completed.
You took out a separate loan to build the investment dwelling, on the land.
The expected completion date of the investment dwelling's construction is in a future year.
You will rent the property once the construction, of the investment dwelling, has been completed.
You are aware that you cannot claim a deduction for the interest on the loan related to the purchase of the block of land.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1