Is the interest on a Division 7A complying loan deductible?
I am a shareholder in our family company and I repaid a loan to the company. I now want to claim the interest as a deduction. Am I permitted to do that?
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Answer by Anton Joseph, Sydney 2000 NSW
- There is nothing special about the deductibility of the interest in this situation. General principles about when interest is deductable will apply.
- If you repay the loan to the company according to the agreement you will be entitled to deduction for any interest that you incurred provided the use of the loan complies with section 8-1 of the Income Tax Assessment Act 1997.
- This section (general deductibility) requires that the loan be used for a purpose that generates assessable income. Therefore if the loan is used for a private purpose the interest will not be deductible.