On Wed 27.6.2018, the ATO released Product Ruling PR 2018/6 (Deductibility of interest in relation to an investment in a Chan & Naylor Property Investor Trust).
This ruling considers the tax consequences of investing in a trust offered by CNIP Pty Ltd, using borrowings that are on arm’s length and commercial terms.
In particular, it rules that:
- interest and borrowing expenses are wholly deductible in the income year they are incurred; and
- the scheme described in PR 2018/6 is an ordinary commercial transaction such that Pt IVA of the ITAA 1936 will not apply.
DATE OF EFFECT: from 1 July 2017.
[LTN 121, 27/6/18; Tax Month – June 2018]
Study questions (answers available)
- Does the Commissioner rule that interest on money borrowed, to fund this investment is deductible?
- Does he also rule that Part IVA doesn’t apply?
- Is this a Class Ruling?
