Who can claim
This deduction is available to individuals and companies.
- The expense is incurred in carrying on an existing income-producing business.
- Any private, capital or non-income-producing component is reasonably apportioned or excluded.
- The borrowing is used for an income-producing business purpose.
- The cost is an eligible borrowing expense, such as a loan establishment fee, lender charge, valuation fee or security-registration cost.
What you cannot claim
- Do not include private drawings or personal expenses.
- Do not treat a capital asset, improvement or acquisition cost as an ordinary operating expense.
- Private or mixed-purpose borrowings are excluded or apportioned by tracing the use of the borrowed funds.
- Principal repayments and costs of acquiring an asset or business are not borrowing expenses.
How the amount is worked out
If total eligible borrowing expenses are $100 or less, claim them in the year incurred. If they exceed $100, spread them over the shorter of five years or the loan term, using relevant days in the first and last years. If the loan is repaid early, any remaining eligible amount is generally deductible in that year. Apportion mixed business and private use.
Records the ATO expects
- Loan documents
- Lender invoices
- Funds-tracing schedule
- Loan start, end and early-repayment dates
- Borrowing-cost schedule
Before you rely on this rule
Loan term, exact days, early repayment and mixed use affect the deduction schedule.
Where this rule comes from
Primary source: Income Tax Assessment Act 1997 section 25-25 (Section 25-25). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.
Supporting sources:
- ATO business income and deductions (Updated 1 June 2023)