Are Your Interest Payments Tax Deductible?

If you own a business, yes, they are. As the owner of a business, you can claim deductions for the expenses that you run up while operating that business. However, these expenses must relate directly to how you earn your assessable income.

The ATO, the Australian Taxation Office, provides guidelines on what you can and can’t claim as a deduction. It depends on the nature of each expense for what you can deduct, but the expenses must relate to your business income. These expenses are taken off your assessable income, and with your income then reduced, you pay less tax.

 

Are your interest payments tax deductible?

 

If you borrow money to pay expenses that are related to your business’s earnings, for example for employer superannuation contributions, income tax, or buying assets that help you earn income, the interest payments are tax deductible.

If you arrange for FundingPro to help you find your next business loan, you will incur interest costs on the repayments of that loan. These interest costs can be deducted from your income on your next tax return.

Taxable Income = Assessable Income less Allowable Deductions

Of course, these claims will require proof. It is of the upmost importance to keep records of each of your business transactions, including all of your expense claims. You must keep these records for five years after the tax return is completed for the year in which the expenses were incurred.

This is a good time to think about whether your filing system is sound. If you aren’t able to locate your records, you could be denied your claim, a risk you want to avoid. It’s best to store them in a way that’s easily accessible, for example, not in a storage warehouse that is located away from your office.

Now that you’re sure that interest payments are deductible, let us know if we can help with a loan for your business, apply now.