Private ruling application form (not for tax professionals) 	

Use this form to apply for a private ruling for yourself or on behalf of another person or entity. If you are a tax professional, please use Private ruling application form (tax professionals) (NAT 13043).

For help completing this form see How to apply for a private ruling on www.ato.gov.au

Section A: Your details (or details of the entity this private ruling is for)
1	Provide your full name if the ruling is for you (or the name of the individual or entity the ruling is for)

 A private ruling only applies to the entity named in the ruling and to the particular scheme or circumstance set out in that ruling.

Full Name 
(including title)	Put all names on title deed	Date of application		

2	Please provide your tax file number (TFN) or Australian business number (ABN)

 You are not obliged to quote a TFN, but your ruling may be delayed if you do not.

ABN or TFN		Your relationship to the entity 
(for example - self, partner, spouse, public officer, agent or legal personal representative)	self	

Section B: Contact details
3	Who is the contact person for this application? (If it is you and you have entered your full name in Section A, enter ‘as above’)
As above	

4	Contact’s daytime telephone number (include area code)

5	Contact’s fax number (if available)

6	Address for the private ruling and related correspondence
Street address or PO Box 		
		
Suburb or town		
State or Territory               		Postcode		

Section C: Questions and facts
7	Questions and issues for the ruling
The Tax Office can only give a private ruling on the application of specific tax laws. Please list the questions and issues that you want the ruling to address. 

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1)	 Is the interest and capitalisation of that interest, on the rental property line of credit (LOC) tax deductible while ever the rental property is income producing?
2)	Would the ATO use Part IVA to deny us a deduction for the capitalised interest?

8	Facts describing the scheme or circumstance
Give a full description of the scheme or circumstance. Please include all facts, assumptions, transaction dates and the names of other parties actively involved. Send copies of any relevant supporting documents with this application. Sending the right supporting documents will speed up the ruling process. See supporting documents information for more information on what documents and facts we require for the most common private ruling topics. 

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Consider using if you have an offset account against your home loan:
We have a loan on our own home on which we owe $    .  In order to make the most of every cent we have available from pay day to pay day we have attached an offset account to this loan.  This offset account is used as our day to day banking account where we hold money for as long as possible to reduce the interest charged on our housing loan.  All our income (including rent) is paid into that account and all our personal expenses including our credit card are paid from it. The only exception being the expenses from the rental property, these are paid from a separate LOC so that we can always be sure there are sufficient funds in the account to meet the interest repayments on the rental property loan and so that all rental transactions are quarantined from other expenses, making it easier to collate the information needed to prepare our income tax returns.  

Our accountant is concerned that the interest on the rental LOC may not be deductible if the ATO choose to take a narrow view of Part IVA.  So before we lodge our tax return we would like to confirm that Part IVA does not apply to our circumstances.  We consider our dominant purposes to be organising our affairs so that every spare cent is working against our home loan for as long as possible, avoiding the record keeping nightmare of dissecting interest, having a succinct record of all rental property expenses because they are the only transactions through the Rental LOC and probably the most important of all from our point of view that we do not have to worry who has been spending what during the month to be sure that there is still enough credit available in our personal LOC to make the interest payment on the rental property interest only loan.  The rental property LOC, set with a comfortable amount of available credit ensures that we never default on our rental property interest payment.  
Further relevant information:
We owe $ on our rental property
The rental property LOC is secured by the rental property
Our Personal LOC is secured by our own home
The LOCs are not linked 
This arrangement was not a product marketed by the bank but simply our specific use of various loan products available individually to all borrowers.  We think that the most likely reason the banks offer these products is to allow people to keep as much money as possible offset against their home, whether they have a rental property or not, so they can pay their home off sooner. 

Or

Consider Using if you have a LOC against your home loan
     We have a loan on our own home on which we owe $    .  In order to make the most of every cent we have available from pay day to pay day we have arranged for this loan to be a line of credit (Personal LOC).  Accordingly, this is where all our income is deposited (including rent), we hold the money in this Personal LOC as long as possible to reduce the interest charged on our housing loan.  All our personal expenses including our credit card are paid from this LOC.  The only exception being the expenses from the rental property as we are aware that if we were to draw from our personal line of credit we would create a mixed purpose loan, the rental property has a negative cashflow,  To avoid the record keeping nightmare associated with analysing every entry to our personal LOC and then apportioning every interest charge we have opened a separate LOC (rental property LOC) from which the rental expenses are paid and from where the interest payments on our interest only loan for the rental property are drawn.  This also assists us in preparing our income tax return because only rental property expenses appear on the statement.  A LOC also gives us the benefit of not having to worry if there is enough money available to meet the interest payments when they are due.
     Our accountant is concerned that the interest on the rental LOC may not be deductible if the ATO choose to take a narrow view of Part IVA.  So before, we lodge our tax return, we would like to confirm that Part IVA does not apply to our circumstances.  We consider our dominant purpose to be organising our affairs so that every spare cent is working against our home loan for as long as possible, avoiding a record keeping nightmare of dissecting interest, having a succinct record of all rental property expenses because they are the only transactions through the Rental LOC and probably the most important of all from our point of view that we do not have to worry who has been spending what during the month to be sure that there is still enough credit available in our personal LOC to make the interest payment on the rental property interest only loan.  The rental property LOC, set with a comfortable amount of available credit ensures that we never default on our rental property interest payment.  
Further relevant information:
We owe $ on our rental property
The rental property LOC is secured by the rental property
Our Personal LOC is secured by our own home
The LOCs are not linked 
This arrangement was not a product marketed by the bank but simply our specific use of various loan products available individually to all borrowers.  We think that the most likely reason the banks offer these products is to allow people to keep as much money as possible offset against their home, whether they have a rental property or not, so they can pay their home off sooner. 

9	Your arguments and references (optional)
Explain how you think the law applies to this scheme or circumstance. Include any research and analysis you have done and any references to relevant legislation, public rulings or case law. Completing this may reduce our need to ask for further information, which will speed up the ruling process.

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     There is nothing unusual about the loan structures, yes a tax benefit is gained but the loans are used in the same way as they would be used if we did not have non deductible debt or if we did not have a rental property.  Our dominant purpose is the same as those who do not have non deductible debt ie quarantining deductible expenses in one account for ease of tax return preparation and making sure we do not have to worry about meeting the interest payment on the rental property loan when due.  In the case of those who do not have a rental property but do have debt on their own home, they would make sure that every spare cent was offset against their mortgage until needed.  Just as we are doing through this arrangement.
     As the loan structure is not artificial, the ATO cannot dictate how a taxpayer allocates their money, and capitalised interest is deductible, if the original interest is deductible.  There seems to be no reason why the interest would not be tax deductible in these circumstances.  Further to require us to pay an arbitrary amount of the rental LOC when no payment is required is what would be artificial and certainly not the norm.

References:
Case No, F17 Board of Review No. 1 22nd April, 1955
"However ill-advised and foolish his mode of living may be, he is entitled to conduct his personal affairs and his business as he will and as long as he does not come within any provision of the income tax Acts the Commissioner must accept things as he finds them."
Tweddle V FCT ATD 1942
"It is not suggested that it is the function of income tax Acts or those who administer them, to dictate to taxpayers in what business they shall engage or how to run their business profitably or economically.
Tooheys Ltd v Commissioner of Taxation NSW 1922
"It is not for the court or the Commissioner to say how much a taxpayer ought to spend in obtaining his income, but only how much he has spent".
Hart's cases from the start without deviation stated that capitalised interest is tax deductible.  Further when considering the loan structures it stated: 
"It may mean no more than that, in considering the terms of the borrowing for investment purposes, the taxpayer took into account the deductibility of the interest in negotiating the terms of the loan. How could a borrower, acting rationally fail to take it into account?"

ID 2006/298 – States that choosing not to make the interest payment on a rental LOC will not provoke Part IVA.

PBR 69725 – The ATO did not require the taxpayer to use wages or other income ie dividends to prop up the cash shortfall in the investment. The ATO said they could borrow the shortfall instead and that interest on interest would be deductible. 
PBR 81797 - Accepted the dominant purpose was not a tax benefit but simply quarantining a rental property expenses, so Part IVA did not apply. 
PBR 94265 ATO accepted that the taxpayers dominant purpose was to pay off their home loan sooner so Part IVA did not apply.

FCT v Indooroopilly Children’s Services (QLD) Pty Ltd 2007 ATC 4236 – A proposition such that the Commissioner does not have to obey the law as declared by the courts until he gets a decision that he likes was astonishing.

	

Section D: Checklist

In some circumstances, applications for private rulings are not valid under the Taxation Administration Act 1953. This checklist helps us to determine whether the private ruling application is valid. 

For more information please refer to How to apply for a private ruling on www.ato.gov.au

Please complete each question. Place a cross  (or type x) in all relevant boxes.

 The questions refer to the individual or entity to which the ruling will apply.

10 Is there, or has there been, a Tax Office audit on the issues raised in this ruling request, or have you been notified of a proposed audit?	Yes
	No
x	
If you answered Yes to question 10, please provide the details of the Tax Office reference number(s) and the name(s) of the tax officer(s) conducting the audit. 	Tax Office reference number(s):
	
	Name of tax officer(s):
	
11 Have you sought an oral or written ruling for these issues before?
	Yes
	No
x	
If you answered Yes to question 11, please provide the details of the Tax Office reference number(s) and the date(s) of the ruling(s).	Tax Office reference number(s):
	
	Date(s) of ruling(s):
	
12 What is the income year or other accounting period that you are seeking the private ruling for? (Enter start and end dates, for example 1 July 2005 to 30 June 2006.)	2012 and following	
If you are unable to identify the start and end dates at question 12, state which events will determine the start and end dates of the private ruling. 		
13 Are you seriously considering the scheme or arrangement?	Yes
x	No
	
14 Are you reasonably certain of the facts you set out?	Yes
x	No
	
15 Are you registered for GST?	Yes
	No
x	
If you answered Yes to question 15 and the entity is registered as a GST branch, quote the parent entity ABN and the three digit branch registration number.		

 Please check that you have answered all the relevant questions before submitting your application.

Section E: Declaration and signature
Declaration
If you are applying for your own private ruling, or are applying as a legal personal representative, by signing this form you are declaring that:
•	the information contained in this document, and any attached documents, is true and correct. 

If you are an agent, by signing this form you are declaring that:
•	this document and any attached documents have been prepared according to the information supplied by the entity identified in Section A of this form (the entity)
•	you have received a declaration from the entity stating that the information they provided to you to prepare this application is true and correct, and
•	you are authorised by the entity to give this application to the Commissioner of Taxation.
 ‘You’ includes a trustee of a trust, a partner in a partnership, public officer, company director.
 ‘Legal personal representative’ means an executor or administrator of a deceased estate, a person holding a general power of attorney, or a trustee of an estate of a person under a legal disability. 
 ‘Agent’ includes spouse, relative, friend, or another agent (but not a tax agent or other tax professional) authorised to give this application to the Commissioner of Taxation.	

Please sign and date if you are sending via fax or post or delivering by hand.
Name		
Signature		
Date			

	The Tax Office is authorised by the Taxation Administration Act 1953 to ask for the information on this form. We need this information to help us respond to your private ruling application. 

How to lodge this form
 You can lodge this application via the Business Portal, or by fax, post or by hand delivery to the Tax Office.

The business portal
If you lodge via the Business Portal, you will receive an instant receipt and your application will be actioned faster than if lodged via post.

If you are lodging by fax or post, use the appropriate fax number or postal address below:
	Fax	Post	
Individuals 	(02) 6225 0901 	Micro Enterprises and Individuals – Provision of Advice
PO Box 1130
Penrith  NSW  2740	
Micro business (less than 
$2 million turnover)	(02) 6225 0901	Micro Enterprises and Individuals – Provision of Advice
PO Box 1130
Penrith  NSW  2740	
Small medium business 
($2 million to $100 million turnover)	(02) 6225 0906	Small medium business – provision of advice
PO Box 3000
Penrith NSW 2740	
Excise	1300 650 128	Australian Taxation Office 
PO Box 3001
Penrith NSW 2740	
Superannuation	1300 669 846	Australian Taxation Office
Superannuation business line
PO Box 3100
Penrith NSW 2740	
Large business (generally group turnover of $100 million or more) and international	1300 661 106	Australian Taxation Office
LB&I provision of advice
PO Box 377
Albury NSW 2640	
Goods and services tax	1300 139 031	GST technical advice
GPO Box 9935
In your capital city	
Accounting, debt, lodgment or registration matters	1300 139 035	Operations Private Rulings Unit
PO Box 9990
ALBURY NSW  2640	
Investment schemes advice	1800 033 211	Australian Taxation Office
PO Box 3546
Albury NSW 2640