Attention Business Owners- Do you have an ATO debt?

Do you need to pay off your ATO debt?

Did you know the interest related to the borrowings may be tax deductable? We had a recent influx of new clients who own businesses that owe the ATO a number of years of outstanding tax returns or have not paid their ATO obligations.

It is important to know when borrowed money could be a tax deduction.

The main criteria of assessment if the interest is deductible is if there is a strong correlation with income-producing activities now or in the future, and can not be of a capital, private or domestic class. If you are a sole trader, for example, then interest to borrow to pay income tax is tax-deductible.

However, this is not applicable for an individual in a partnership, especially where it is related to personal tax obligations or expenses. This is because there is no link between business or income-producing activities for the partnership. However, where money is borrowed to redistribute equity in the partnership, this is deductible.