Individual denied interest deduction - 26th August 2013

In a recent decision, the Administrative Appeals Tribunal (AAT) has affirmed a decision of the Tax Commissioner to deny a taxpayer claim for a personal deduction for interest and bank fees of over $120,000. These were incurred over a two-year period in relation to rental properties purchased by a family discretionary trust that had been set up for that purpose, and of which the taxpayer was the trustee.

The AAT was of the view that the bank had lent the money to the taxpayer in his capacity as trustee of the trust, and not in his personal capacity. The AAT was also not convinced by the taxpayer’s argument that the bank had been mistaken in relation to the legal character of the person to whom it had lent the money. The AAT therefore upheld the Commissioner’s decision not to allow a personal deduction. 

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