Generally, interest costs can be deducted for income tax purposes where the funds are applied for a ‘business’ purpose. Care needs to be taken when borrowing funds, particularly when purchasing real estate. For example, if you rent your current home and borrow funds to purchase a new house to reside in, the interest charged on this loan will not be tax deductible, as it will not be used to produce income, such as rent. To ensure that your interest tax deductions are maximised, you should consult us before borrowing any significant funds.
Revolving credit facilities can present difficulties when trying to calculate the interest that will be deductible. If this facility is used for both business and private purposes then details should be maintained to record the non-business component of the interest.