Key Takeaways
- Interest on business loans is 100% tax-deductible for work use.
- Apportionment is mandatory for personal vs work travel.
- Keep the monthly bank statement and loan agreement.
- Interest on "private" loans is NOT deductible.
The Short Answer
A Big Yes! The ATO recognizes that paying interest on business-related loans and overdrafts is a legitimate business expenditure. Whether you're paying interest on a loan for specialized equipment, a vehicle, or business operating costs, you can claim a deduction for the full amount of interest you've paid.
Who CAN Claim?
A deduction is only available if there is a direct connection between your job and the loan. This includes any business where a loan is a requirement, such as:
- Sole traders and small business owners (e.g., overdrafts or equipment loans)
- Consultants and freelancers (e.g., for specialized tech or branding)
- Real estate agents (e.g., for specialized marketing or vehicles)
- Anyone who needs a business loan for their daily business role
Wait—What is NOT Deductible?
A deduction is NOT available for interest paid on personal loans or mortgages that is not related to your income-earning activities. For instance, if you're a standard employee and you pay interest on a personal loan for a vacation, that is NOT tax-deductible.
Supporting Evidence 2026
Keep your monthly bank statement and formal loan agreement for all business loan and overdraft interest payments. If you use the loan for both business and personal expenses, you must apportion your claim based on that dual use.
The 2026 Audit Ready Tip
Ensure your tax return specifically mentions "Business Loan Interest" as a legitimate business expense. If you use a loan for multiple purposes (e.g., part personal and part business), keep a spreadsheet matching the expense to the business or personal category.
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