My wife and I are planning to start a small equipment hire business. Since it's too difficult to get a business loan for a startup business, we're planning to take out a personal loan and use that to purchase the business equipment. We want to make sure the interest on this loan becomes a personal income tax deduction (since it is income producing). How do we handle this personal loan money for business purposes? Do we just transfer it to the business bank account and purchase equipment form there? Is it best to treat the money as an investment into the business (expecting later returns) or a loan to the business (expecting repayment and possibly interest)? The former seems easier. Does it matter if the business structure is a company vs a partnership? Thank you :)
3,497 views
4 replies
Hi @GoatGuy
This looks like things could get a little tricky here. Let's have a look.
You can claim a deduction as a business operating expense with interest on money borrowed for producing assessable income or purchasing income-producing assets. I can see this is what you're trying to get in motion. It'll be best in this case to get in touch with our Tailored technical assistance team.
They can take all the info you've given and ask more if needed and tailor the advice they give back to you.
All replies
Hi @GoatGuy
This looks like things could get a little tricky here. Let's have a look.
You can claim a deduction as a business operating expense with interest on money borrowed for producing assessable income or purchasing income-producing assets. I can see this is what you're trying to get in motion. It'll be best in this case to get in touch with our Tailored technical assistance team.
They can take all the info you've given and ask more if needed and tailor the advice they give back to you.
Hi Deb,
I have similar question.
I have a business loan 1.2M currently, pay around 65K interest per year.
I have a personal house worth 2.5M. I have the following plan.
Use this personal house to loan 1.2M to repay the 1.2M business loan.
My company will pay myself 60K interest per year, the interest is deductable in my company.
I personally will received 60K interest, and pay the bank 60 interest per year.
The only reason for this plan is personal loan is cheaper than the business loan.
Please check whether is there any issues in this case ? I beliveve there is no problem in company side and my personal side.
Yes, interest on a personal loan can be tax-deductible if the money is used solely for income-producing purposes, like buying business equipment. To keep things clean, transfer the loan funds straight into your business account and use them only for business expenses.
Whether you treat it as a loan or an investment into the business depends on your structure—for a company, a director’s loan is common, while for sole traders or partnerships, it’s more straightforward.
Just make sure to keep clear records showing the loan purpose, transactions, and repayments. For anything complex, it’s best to check with a tax adviser.
Featured articles
22 Apr 2024 · 3 min read time
15 Apr 2026 · 4 min read time