I compiled a private ruling application myself and faxed it to the ATO about 2 weeks ago. I thought I might post my adventure as it unfolds for those also looking to do this. Today a nice man from the ATO called me. I have had nightmares about answering the phone and hearing 'This is xxx from the ATO' but it wasn't that bad. He asked a couple of questions to clarify my requests and said that my "work was excellent" and "amazing".... Now that's is nice to hear, but all I needed to hear was "yes". They are unable to give oral ruling, but he said I also could have called for advice instead of applying for a ruling. Hmmm, not binding and probably not accurate me thinks. Further details of the man from the ATO are being mailed to me, and I should expect the written ruling in about 2 weeks. The outcome of the ruling will not change what I am doing as I am already doing it, just determine what I do and don't claim for some interest deductions. I made this point clear on the application and today on the phone. I'll keep you all posted.
Well done Mr D! That is an incredibly fast turnaround. I wouldn't hold your breath for written ruling. Looking forward to hearing about your adventures in taxland. Cheers N.
Could be!! There are just some many ways of capitalising interest, I'll post the application and the ruling together when the time comes. On a more serious note, I think there is a new small green spot going "blip blip" on the ATO audit radar
Got it ! My private Ruling arrived in the mail today, that wasn't so hard ! Faxed 16th May, ATO mailed 2nd June, in my hands 6th June. Anyhow, the ruling is to cover two questions. Part 1 is easy, "Are you entitled to claim a deduction for prepaid interest on a loan used for income producing purposes" . Yes Part 2 was the biggie, "Are you entitled to claim a deduction for interest incurred on redrawn funds used to prepay interest on your investment loans" YES It is ruling number 63384 but I can't see it on the ATO site yet. Getting the ruling wasn't much of an adventure after all, but I wonder when the notice of audit will arrive That will be the next adventure.
Mostly from scratch. I did read up on few similar ones first, and there was a link posted on this forum in the past on a similar ruling 44746. I looked at that and quoted it for the tax law references it contained. The application form is a good template in itself. PM me if you want a copy of the application.
Well done indeed! Can you please confirm my understanding of the situation you are dealing with: 1. Draw down funds from an LOC. Eg, you draw down $10K. You will then have to pay interest on this drawdown over the next year of $700 (assuming 7% interest). 2. Use the $10K to pre-pay the interest interest on another loan (eg margin loan, or a loan for an IP) used for income producing purposes. 3. Claim a deduction for the $10K (covered by part 1 of your ruling). 4. Claim a deduction on the $700 interest on the initial drawing (covered by part 2 of your ruling). Is that it? There is no mention of the type of loan the funds are drawn from in Step 1. I have assumed it is an LOC that you are using for investment purposes. What if I had the $10K in an offset account on my PPOR mortgage. If I withdrew the $10K from the offset could I claim the $700 interest as a deduction? Would your ruling cover that as well? John.
Hi, Close, but no connection with offset accounts here. What I have had confirmed is that borrowing to pay for interest costs on loans used for investment, is itself a tax deducable expense. Interest on interest can be deductable. In this case the interest on investment loans were big lump sums as I was prepaying for a year. I redraw these funds from my PPOR home loan and the interest charges that will be accured from now on those drawings is deductable. This is a good arrangement as: - good for cashflow - by the interest costs coming from a dedutable loan, I have increased my deductable borrowings and will have more cash during the next year to pay down other non-deductable debt. Debt converstion is quite important as I still have another large PPOR loan. I scanned the ruling today and it is now attached. perhaps this will make things clearer.
What if I draw down from a loan to pay the interest on the interest on the interest. Is the interest on the interest on the interest deductible? What if I draw down from a loan to pay the interest on the interest on the interest on the interest.........
Good Lord ! I worship at the altar of Mr D - outstanding effort ! "Faxed 16th May, ATO mailed 2nd June, in my hands 6th June." (are you absolutely certain it was the ATO you were dealing with ??
Yes, a little prayer may be required. I'm sure I'm a BLIP in the audit radar now. The PR was just to get me to lower defenses
Thank you Mr Darcy for sharing your good experiences with the ATO - They don't get much good publicity. As an aside, I don't mean to alarm you but one of my friends was a senior investigator with the ATO and hen mentioned that applying for a PR was "like waving a red flag at a bull" Regards Terryw [email protected]
