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06 Oct 10 Decision Impact Statement - Tanti

The ATO has published a Decision Impact Statement in relation to the decision of the Administrative Appeals Tribunal in Re Tanti and FCT [2010] AATA 549 (23 July 2010). The case concerned whether interest incurred on funds borrowed by the taxpayer from his mother, and, in the main, on-lent interest-free to a company of which he was the sole shareholder and director, was deductible under s 8-1 ITAA 1997.

The Tribunal agreed with a concession made by the Commissioner that a deduction was allowable for interest paid on funds borrowed by the taxpayer that related to the purchase of shares in an unrelated company. That concession was made after the taxpayer provided further evidence during the conduct of the case.

However, the Tribunal decided that the remainder of the interest was not allowable under s 8-1. The Tribunal found that there was no relevant connection between the interest paid or payable by the taxpayer to his mother and the receipt of any income from his company during the 2006 or 2007 income years. The decision in FCT v Total Holdings (Aust) Pty Ltd 79 ATC 4279 was distinguishable because there was no prospect of the taxpayer deriving income from the company in the future. The company's business was not profitable and was sold prior to the 2007 income year.

The ATO view of the decision, as set out in the Decision Impact Statement, is that, subject to the concession made by the Commissioner based on the evidence provided by the taxpayer during the conduct of the case, the Tribunal found that the interest incurred by the taxpayer was not deductible. This case was decided on its own facts.


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