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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 deductable is if there is a strong correlation with income producing activities now or in the future and cannot 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 deductable.
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 deductable.
If you need help with someone who can assist with financing ATO debt or need assistance from us confirming the relationship with the income producing activity, don’t hesitate to call us on 03 9848 5933.