Issue
Is the taxpayer entitled to claim a deduction for interest incurred on loans used to finance share trading activity under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997')?
Decision
Yes. The taxpayer is entitled to claim a deduction under section 8-1 of the ITAA 1997.
Facts
The taxpayer is carrying on a business of share trading.
The taxpayer has taken out a loan at interest to obtain capital to carry on a share trading business.
Reasons for Decision
Interest is deductible under section 8-1 of the ITAA 1997 to the extent that it is incurred in gaining or producing assessable income or in carrying on a business for that purpose, except to the extent that the expense is of a capital, private or domestic nature or is incurred in gaining or producing exempt income.
The taxpayer has taken out a loan to finance a business activity of share trading. As the income produced by the business is assessable income, it is accepted that interest on the loan incurred to buy the shares is incurred for the purpose of producing assessable income.
The taxpayer is entitled to claim a deduction under section 8-1 of the ITAA 1997 for interest costs incurred.