The Australian Taxation Office has issued a new tax ruling on split loans, revising the ruling it made more than a decade ago.A split loan is one where the borrower has a mortgage, an investment loan and a line of credit in a single finance structure. All repayments go to the mortgage to accelerate amortisation of that loan, while tax-deductible interest on the investment loan is capitalised.Capitalisation of the interest on the investment loan results in higher deductions on the tax-deductible investment loan.The ATO's original ruling on split loans was controversial and led to a test case (Hart's case), which ended up in the High Court.Hart argued that he entered into the split loan arrangement for a legitimate purpose, which was to pay off his home loan quickly.In 2004, the High Court confirmed that the Part IVA anti-avoidance provisions of the Income Tax Assessment Act applied to split loan arrangements.The new ruling (TD 2012/1) says that a taxpayer's aim of paying off a home loan sooner, or owning a home sooner, does not prevent the application of the anti-avoidance provisions.The ATO cites the High Court finding that: "A particular course of action may be both tax driven and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Part IVA, a person entered into or carried out a scheme for the dominant purpose of enabling the taxpayer to obtain a tax benefit."