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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 5: Meaning and treatment of interest expenditure for this subpart

You could also call this:

"What interest expenses mean and how they are treated under the law"

When you have expenses for interest, it means you have spent money on interest. This includes interest on money you have borrowed from financial arrangements that give you funds and allow you to claim a deduction. You can find more information about this in section DG 9(3)(a) or section DG 11.

If you are not a company, your interest expenses are included in your expenditure. If you are a company, but not a qualifying company, your interest expenses are split under section DG 11. If you are a qualifying company, you are treated as if you are not a company for this part of the law.

Interest expenses do not include deductions that only happen because of changes in currency exchange rates.

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Part DDeductions
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. 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): repealed, on , by section 42(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
              • Section DG 5 list of defined terms beneficiary: repealed, on , by section 42(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
              • Section DG 5 list of defined terms disallowed residential property: repealed, on , by section 42(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
              • Section DG 5 list of defined terms interposed residential property holder: repealed, on , by section 42(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).