Private ruling: Business – expenses – after cessation
Date of advice: 16 February 2018
Published: June 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you entitled to a deduction for a portion of the interest expense on your loan after the cessation of your business where no funds are available to repay the loan? | A1: Yes The portion of interest expenses relating to the production of business income will be allowed as a deduction under section 8-1 of Income Tax Assessment Act 1997 . The Commissioner’s view on the deductibility of interest expenses following the cessation of the relevant income producing activity is considered in Taxation Ruling TR 2004/4.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1


Relevant facts: You opened a business as a sole trader and borrowed the funds to do so. | The loan was an extension of your home loan. | You subsequently borrowed further funds to finance the business. | The loan moneys were used to purchase the business and for refurbishment. | The business later closed, and you are now working for a salary. | The business assets were sold, which left you with an outstanding lease payment on the premises, as well as business bills such as solicitor fees and mortgage. | A large debt from your moneys borrowed for the business was outstanding after using the sale proceeds to pay outstanding debts. | The loan terminates in several years. | You regularly repay the loan each month with principal and interest repayments. | You do not have sufficient funds to pay out the business loan.