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Edited version of private advice
Authorisation Number: 1052326160265
Date of advice: 1 November 2024
Ruling
Subject: Rental deductions
Question
Are you entitled to a deduction for the loan interest on the construction of a rental property prior to it being available for rent?
Answer
Yes.
Based on the information provided to the Commissioner you can have a deduction for the interest on the portion of the loan used to construct the rental property.
You can apportion the loan interest and claim a deduction for the portion of the loan interest relating to the construction of the rental property prior to the property being available for rent.
You are not entitled to a deduction for the interest on the loan which relates to the land, and you are not able to claim any of the holding costs associated with the land until the property is genuinely rented.
The interest on the portion of the loan relating to the construction of the rental property is allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997. Section 26-102 of the ITAA 1997 does not prevent you from claiming a deduction for the portion of the interest on the loan used to construct the rental property.
This ruling applies for the following period:
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 the property a couple of few years ago with the intention of constructing a rental property.
You took out a loan to purchase the land and construct a rental property.
Construction of the rental property commenced several months after the property was purchased and was completed in the following year.
You intend on renting the property out in the next month.
The rental property is a standalone home.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 section 26-102