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Edited version of private advice
Authorisation Number: 1052414903725
Date of advice: 1 July 2025
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 loan used to construct the rental property. You purchased the apartment off the plan.
The loan you took out is solely for the construction of the apartment.
You can claim a deduction for the loan interest relating to the construction of the rental property prior to the property being available for rent. You can include the amount in a rental schedule in the return. The interest on the loan for the construction of the rental property is allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997 for the period from when you took the loan out until construction is completed.
Section 26-102 of the ITAA 1997 does not prevent you from claiming a deduction for the interest on the loan used to construct the rental property.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
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 are a resident of Australia for taxation purposes.
You entered into a contract to purchase an apartment off the plan.
Under the contract of sale, the apartment is to be leased to a company for a number of years, with a minimum guaranteed leasing term.
The intention from the outset has been to derive rental income through this arrangement.
You do not intend on using the apartment for any personal use.
Construction commenced on the apartment several years ago.
You secured a loan to complete the purchase of the apartment.
The loan is solely for the construction of the apartment.
The apartment is expected to be completed in a few months.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 section 26-102