Borrowing costs are deductible to the extent that they are incurred for the purpose of producing assessable income, but they may need to be amortised over the period of the loan or five years, whichever is shorter, as per section 25-25 of the Income Tax Assessment Act 1997.
The ATO does not state that borrowing costs are entirely non-deductible. Instead, the treatment of borrowing costs depends on their nature and the specific circumstances. For example:
1. Borrowing costs that are directly related to obtaining or maintaining financial benefits under a debt interest may be deductible as debt deductions
2.If borrowing costs are expensed in full in the accounts but need to be amortised for tax purposes, the reconciliation section of the tax return may require adjustments to reflect the correct tax treatment.
3. Borrowing costs incurred for purposes other than producing assessable income, or where the loan does not proceed, may not be deductible.
It is important to ensure that borrowing costs are correctly classified and treated in accordance with the relevant provisions of the ITAA 1997.
2.If borrowing costs are expensed in full in the accounts but need to be amortised for tax purposes, the reconciliation section of the tax return may require adjustments to reflect the correct tax treatment.
3. Borrowing costs incurred for purposes other than producing assessable income, or where the loan does not proceed, may not be deductible.
It is important to ensure that borrowing costs are correctly classified and treated in accordance with the relevant provisions of the ITAA 1997.