Sometimes a related part or non-arms length loan may come to an end. And the final balance may not be repaid. It may be forgiven, called a gift...whatever. This may leave an assessable income adjustment for the taxpayer/s who claimed the interest deductions. Think of it this way - You have overclaimed deductions over the life of the loan. The ATO can consider these a limited recourse loan. Limited recourse loans generally create concerns about deductible amounts. Beware of arrangements where a loan is not repaid in full. Seek tax advice.