On 30 January 2025, Matheson made a submission to the Department of Finance in response to its public consultation on the tax treatment of interest. The primary message of our submission was that the rules on taxing interest have become overly complex and are in need of modernisation. We suggested that the starting position for any such modernisation should be recognition that, in principle, interest is a legitimate cost of doing business and therefore should be deductible. Our proposal would replace existing antiquated rules (such as the 'interest as a charge' provisions) with a general commercial purpose rule that would permit the deductibility of interest on debt drawn down for a commercial purpose. Under such an approach no distinction would be made between interest on amounts borrowed to fund active and passive activities. You can read our full submission here.
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