OVERDRAFT CHARGES

Greymouth Evening Star, 7 May 1940, Page 8

OVERDRAFT CHARGES

ASSESSABLE FOR TAX Should a business firm in its desire to make available to the Government. an interest-free loan foi* war purposes have to make up the sum of the loan, partly or wholly, from overdraft, that fact does not exonerate it from paying income tax on the overdraft charges, stated information received at a meeting of the Hawera Chamber of Commerce. The meeting pointed out, in addition, that a similar position existed in regard to moneys given to the patriotic funds. “In the matter of the making of in-terest-free loans to the Government for war purposes, there appears to be a certain amount of misapprehension among business concerns on the subject of income tax allowances in relation to this subject,” stated a memo received from the secretary of the Associated Chambers of Commerce of New Zealand, Mr. A. O. Heany, “For the information of chambers, we made inquiries of the commissioner of taxes, who advises that if a firm makes an interest-free loan to the Government when it is in credit, that in no way affects the deductibility for income tax purposes of overdraft charges to the firm when it is in debt, provided sucli overdraft is incurred for the purposes 1 of the conduct of the business.

“The commissioner in investigating the position of firms which, in order to make an interest-free loan available to the Government, would have to borrow on overdraft to make that loan. The present position under the law is that the overdraft charges are not deductible for income tax purposes. This matter is being investigated by the department to see if it is possible to make any amendment to the subject.” The position was discussed, but no resolution was formulated.