Claiming Business Loans – Maximize Deductions (2026)

Are you a business owner navigating the complexities of financing and taxes in Australia? You're not alone. Many entrepreneurs often wonder if they can claim their business loans on their taxes. Understanding the intersection of business loans and tax deductions can make a significant difference in your financial management and tax outcomes.

Understanding Business Loan Tax Deductions

First, let's clarify what it means to claim a business loan on your taxes. In Australia, the ATO (Australian Taxation Office) allows you to claim certain expenses related to your business operations. However, not all parts of your business loan are tax-deductible. Typically, you can claim the interest portion of your business loan repayments as a deduction, but not the principal amount.

Current Interest Rates and Eligibility Criteria

As of 2026, business loan interest rates in Australia typically range from 6.49% to 12%, depending on factors such as your creditworthiness, the lender, and the loan term. When considering a business loan, it’s crucial to evaluate your eligibility:

• Business Age: Many lenders require your business to be operational for at least six months to qualify for a loan.
• Revenue: Demonstrating consistent revenue can improve your chances of securing a loan at a favourable rate.
• Credit Score: A strong credit history is essential. Aim for a score of 600 or higher.

At Esteb and Co, our extensive panel of 83+ lenders provides a variety of options tailored to different business needs, ensuring you have access to competitive rates and terms that suit your unique situation.

How to Claim Business Loan Interest on Your Taxes

Claiming business loan interest on your taxes involves a few key steps:

1. Keep Detailed Records: Maintain clear records of your loan agreement, interest payments, and how the loan funds are used in your business.
2. Separate Personal and Business Expenses: Ensure that the loan is strictly for business purposes. Mixed-use loans complicate tax claims.
3. Consult a Tax Professional: Engage with a tax advisor to accurately calculate deductible interest and ensure compliance with ATO guidelines.
4. File Correctly: Include your interest deductions in your annual tax return under the appropriate category for business expenses.

Expert Tips and Considerations

Here are some expert tips to maximise your tax benefits from business loans:

• Plan Ahead: Understand your cash flow and tax position before taking out a loan. This helps you plan repayments and tax claims effectively.
• Regularly Review Your Finances: Regular reviews can identify opportunities for refinancing or restructuring your loans for better tax efficiency.
• Utilise Technology: Use accounting software to track interest payments and streamline the tax claim process.

Frequently Asked Questions

• Can I claim the principal amount of my business loan on taxes? No, only the interest portion of your business loan repayments is tax-deductible.
• What if my loan is for both business and personal use? You must apportion the interest based on the business use percentage to claim it as a deduction.
• Is refinancing a business loan tax-deductible? The interest on a refinanced business loan can be deductible, similar to the original loan.
• How do I prove the business purpose of my loan? Maintain detailed records showing the allocation of loan funds to business expenses.
• Can I claim interest on overdue business loan payments? Generally, interest on overdue payments is not deductible as it is considered a penalty rather than a business expense.

Understanding how to manage your business loan and its tax implications can significantly impact your financial health. By leveraging the expertise and resources available through Esteb and Co, you can navigate the complexities of business financing with confidence.