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 borrowed funds are used to earn assessable business income.
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.
- Principal repayments are not deductible.
- Private or mixed-purpose use must be excluded or apportioned.
- Debt-deduction limitation rules can apply to some entities.
How the amount is worked out
Claim the deductible interest attributable to business-income-producing use.
Records the ATO expects
- Loan agreement
- Interest statements
- Funds-tracing schedule
Where this rule comes from
Primary source: ATO business income and deductions (Updated 1 June 2023). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.