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Edited version of private advice
Authorisation Number: 1051638434219
Date of advice: 27 February 2020
Ruling
Subject: Business expenses
Question
Are you entitled to a deduction for interest incurred on money borrowed to pay income tax and Pay As You Go instalment amounts that arise from you carrying on a business as a sole trader?
Answer
Yes. Based on the information provided, it is considered that you are entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 for interest incurred on money borrowed to meet your tax obligations arising in relation to your business. Further information on business deductions can be found by searching 'QC 33867' on ato.gov.au.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a medical professional that carries on a business as a sole trader.
You have rental properties in your name which are negatively geared.
You earn some employment income, but this is a small fraction compared to the income earned from your sole trader activities.
You plan to borrow money to pay your Pay As You Go instalments amounts and year-end tax liabilities incurred in relation to your business activities. The borrowings will incur interest.
For the purpose of this ruling, you will borrow the funds as planned and will use them for to pay taxation liabilities arising in relation to your business activities.
Relevant legislative provisions
Section 8-1 of the Income Tax Assessment Act 1997
Section 25-5 of the Income Tax Assessment Act 1997