Can you claim loan break costs as a tax deduction??
Hi,
Penalty interest and mortgage discharge expenses are tax deductible to the extent that the mortgage is used to produce assessable income.
Section 25-30 of the Income Tax Assessment Act 1997 refers to the expenses of discharging a mortgage being tax deductible to the extent that you used the capital to produce assessable income.
You can read the section here
http://law.ato.gov.au/atolaw/view.htm?find=%2225-30%22&docid=PAC/19970038/25-30
In respect of penalty interest, Tax Ruling 93/7 outlines when it is deductible and under what section.
The references in the ruling refer to the Income Tax Assessment Act 1936 which has corresponding sections in the Income Tax Assessment Act 1997 referred to above.
You can read the ruling here
http://law.ato.gov.au/atolaw/view.htm?find=%2293%2F7%22&docid=TXR/TR937/NAT/ATO/00001Regards,
Glenn Wallace
Chartered Accountant, Business Adviser and Regsitered Tax Agent
http://www.businessadviser.com.au
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