Are the costs associated with the car (work-related) loan tax deductible?
Scenario:
Is there a tax deduction available for both an “early termination fee” and “contract break cost” that has been charged on the final payout on a car loan acquired for the purposes of income-producing activity claimed under a logbook method of 90% work use?
Explanation:
Under s 8-1, a taxpayer can deduct any expense that is incurred in earning assessable income. As the car is used for income-producing activity (and the interest on the loan to acquire it will be tax deductible to the extent it related to work use), any payment made to terminate the loan early will also be tax deductible to the extent it related to work use.