Announcements
Are you a tax professional needing a bit more time to lodge? Check out how to apply online for a deferral, or ask the Community!

ATO Community

Goodwill

Newbie

Views 438

Replies 2

Banana Pty Ltd

Equity
- Share capital: ABC Trust $25
- Share capital: Mr A $25

ABC trust borrow money from the bank to purchase all shares from Mr A in market value of $30,000 (Goodwill). Will the interest on goodwill deductible to the Banana company?

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Community Moderator

Replies 0

Hi @Vana 

 

Interest on borrowings can be deductible to the borrower depending on the circumstances. For private companies there is a greater need to consider the particular circumstances than there is for investment in publicly listed entities.

 

In this case, ABC Trust is the borrower and needs to analyse its situation as to whether it is entitled to interest deductions.

 

Where the ABC Trust has paid an amount to the other shareholder consistent with an arms length dealing and the trust has a realistic expectation of a return of its  investment via dividends from a business being carried on by Banana Pty Ltd, then a deduction for interest expenses could be justified for the ABC Trust.

 

Mr A needs to work out any capital gains tax amount that he may have to declare.

2 REPLIES 2

Community Moderator

Replies 0

Hi @Vana 

 

We will look into this one and get back to you.

Most helpful response

Community Moderator

Replies 0

Hi @Vana 

 

Interest on borrowings can be deductible to the borrower depending on the circumstances. For private companies there is a greater need to consider the particular circumstances than there is for investment in publicly listed entities.

 

In this case, ABC Trust is the borrower and needs to analyse its situation as to whether it is entitled to interest deductions.

 

Where the ABC Trust has paid an amount to the other shareholder consistent with an arms length dealing and the trust has a realistic expectation of a return of its  investment via dividends from a business being carried on by Banana Pty Ltd, then a deduction for interest expenses could be justified for the ABC Trust.

 

Mr A needs to work out any capital gains tax amount that he may have to declare.