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Loans a taxing question

MANY small businesses will be forced to pay tax on loans they have made to their own businesses under the new tax system.

Business owners commonly make interest-free loans from their trusts or companies to start up new ventures, often because they cannot get funding from anywhere else.

Now the Australian Tax Office wants a piece of that action.

Under proposed changes to tax law, business operators making non-commercial loans could be taxed up to 48.5 per cent when they are paid back their own money loaned to a business.

GST specialist Tony Ince said the plan to catch non-commercial loans was another administration headache for small business.

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