Tax Deduction for Money Lent to Company

I was speaking to a friend about this over the weekend and he mentioned something that made me want to learn more.

I own a business that I have lent my personal cash to. Unfortunately the business is not going to continue and I will need to shut it down.

The business still has a loan to repay back to me, which is recorded on its books.

A few questions:
1. Can I write-off this debt to the company?
2. If I write-off this debt, can I claim it on my individual tax return as a loss and put it as a deduction to my personal tax return?
3. If I cant do any of the above, does it mean ive just lost my money that I lent to the business and its not recoverable?
4. Is there any other way to report the loss and offset / deduct the loss?

 

Keep in mind a company is separate to a business. Do you own shares in a company which is operating a business?

1. Is there a written loan agreement on commercial terms? if so you might have a capital loss if the money lent is not able to be recovered.
2. Yes - assuming above, it would be a capital loss
3. yes
4. no

 

I was wondering this as well.

I have a PTY LTD company which I own 100% of the shares in. Company has a recent loss on the books and business is shut down. Was hoping to buy a cash cow through the PTY LTD company. Can i lend money in a loan agreement with a sensible interest rate to the company to purchase the property and claim the interest as a deduction. Obviously I would need to pay tax on the interest earned on my personal tax return?

 

Yes that is possible, just get some advice as a few issues to consider.

 

I own 100% shares in the company which is operating as a business.

1. Yes there is a written loan agreement on commercial terms.

So I guess then in terms of a capital loss, I can only offset that against any capital gains and not my personal income?

 

Yes, capital losses can only offset capital gains.

Did you borrow to lend to the company? You might be able to keep claiming the interest too.

 

if you write off the debt owed by the company you will need to carefully consider the commercial debt forgiveness provisions and the tax impacts for the company.