This draft Taxation Determination was released on 3 September 2008 for public comment by 3 October 2008. Its full title is "Income tax: is the deductibility of compound interest determined according to the same principles as the deductibility of other interest?" The answer given is Yes. The draft continues: "The principles governing the deductibility of compound interest are the same as those governing the deductibility of ordinary interest: Hart v FCT  FCAFC 222, 2002 ATC 4608, (2002) 50 ATR 369 (Hart). The Commissioner accepts that this is the law following the Full Federal Court's decision in Hart."
For a copy of TD 2008/D12, go here