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Div7a Interest Tax Deductible

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Can someone please confirm that interest payable on a division 7a loan is not tax deductible (the loan is NOT used in gaining & producing income). Additionally can you direct me where it states this in the ATO website and/or legislation.

Thanks.

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Hi @LachlanRamsay,

 

Thanks for your patience whilst we check information with a specialist area.

 

There is no provision in the legislation that prohibits the interest on a complying Division 7A loan agreement from being deductible. Whether you can claim a deduction for the interest will be determined on whether it satisfies the general deductibility provisions in section 8-1 of the Income Tax Assessment Act 1997.

 

If the interest is not incurred in gaining or producing your assessable income, then it will not be able to be deducted from your assessable income. In order to be deductible, the monies lent from the company to the shareholder need to be spent for a deductible purpose by the shareholder, such as acquiring an income producing asset like investing in shares, or being spent in the shareholder’s business etc.

 

Hope this helps, JodieH.

 

 

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Hi @LachlanRamsay,

 

Welcome to our Community!


We're checking information relating to your query with a specialist area and we hope to get back to you with more information soon.

 

Thanks, JodieH.

Best answer

Community Support

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Hi @LachlanRamsay,

 

Thanks for your patience whilst we check information with a specialist area.

 

There is no provision in the legislation that prohibits the interest on a complying Division 7A loan agreement from being deductible. Whether you can claim a deduction for the interest will be determined on whether it satisfies the general deductibility provisions in section 8-1 of the Income Tax Assessment Act 1997.

 

If the interest is not incurred in gaining or producing your assessable income, then it will not be able to be deducted from your assessable income. In order to be deductible, the monies lent from the company to the shareholder need to be spent for a deductible purpose by the shareholder, such as acquiring an income producing asset like investing in shares, or being spent in the shareholder’s business etc.

 

Hope this helps, JodieH.

 

 

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