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DG 4: Meaning of private use for this subpart
or “What counts as personal use of an asset for tax purposes”
You could also call this:

“How interest costs are defined and handled for tax purposes”

In this part of the law, interest expenditure means money you spend on interest. This includes interest on money you borrow through financial arrangements. These arrangements must give you money and allow you to claim a deduction.

If you’re not a company, your interest spending on an asset is counted as expenditure in section DG 9(3)(a). If you’re a company (but not a qualifying company), your interest spending on an asset is split up according to section DG 11. If you’re a qualifying company, you’re treated as if you’re not a company for this part of the law.

You need to use a special formula from section DG 9(2) to work out how much of your interest spending to count as expenditure if it’s for disallowed residential property that’s an asset. The same applies if you’re spending interest to buy into or become a beneficiary of an interposed residential property holder that has an asset during the income year.

Interest expenditure doesn’t include deductions that only happen because of changes in currency exchange rates.

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Next up: DG 6: Associated persons: company rule modified

or “When company ownership lets you use company assets”
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Part D Deductions
Expenditure related to use of certain assets

DG 5Meaning and treatment of interest expenditure for this subpart

  1. In this subpart, interest expenditure, for a person to whom this subpart applies, means expenditure on interest, and includes an amount of interest on the sum of the outstanding balances of financial arrangements entered into by the person, if the financial arrangement—

  2. provides funds to the person; and
    1. gives rise to an amount for which the person would have a deduction.

      1. For the purposes of this subpart,—

      2. if the person is not a company, an amount of interest expenditure incurred in relation to an asset is included in the item expenditure in section DG 9(3)(a):
        1. if the person is a company other than a qualifying company, an amount of interest expenditure incurred in relation to an asset is apportioned under section DG 11:
          1. if the person is a qualifying company, they are treated for the purposes of this subpart as a person that is not a company:
            1. despite paragraphs (a) and (b), a person must apportion an amount of interest expenditure for the income year using the formula in section DG 9(2) and treat the amount of the interest expenditure as the item expenditure in section DG 9(3)(a) to the extent to which—
              1. the interest expenditure is for disallowed residential property that is an asset; or
                1. the interest expenditure is for acquiring an ownership interest in, or to become a beneficiary of, an interposed residential property holder and the interposed residential property holder has an asset at any time during the income year.

                2. Interest expenditure does not include a deduction for an amount that arises only from movement in currency exchange rates.

                Notes
                • Section DG 5: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 30(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                • Section DG 5(2)(d): inserted (with effect on 27 March 2021), on , by section 41(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section DG 5 list of defined terms beneficiary: inserted (with effect on 27 March 2021), on , by section 41(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section DG 5 list of defined terms disallowed residential property: inserted (with effect on 27 March 2021), on , by section 41(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section DG 5 list of defined terms interposed residential property holder: inserted (with effect on 27 March 2021), on , by section 41(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).