Last week, we had cause to revisit a Tax Office ruling that is often overlooked in the context of family and business succession plans.
In particular, we were reviewing the handing on of control of a family trust, where as part of the overall arrangement, the intention was to pay down the credit loans owed by the trust to the parents of the individual taking control.
The trust was intending to use external bank funding in order to finance the pay down of the loans to the parents.
In this particular scenario, the conclusion was reached that the interest on the borrowing expense should be deductible – this conclusion was reached on the basis of Tax Ruling 2005/12.
The ruling is worth reviewing whenever interest deductibility is in issue as there are a number of fairly similar situations where the interest expense would not in fact be deductible, according to the analysis of the Tax Office.
As usual if you would like a copy of the ruling please contact me.
** For the trainspotters, ‘Take the Money and Run’ is a song by The Steve Miller Band from 1976, listen here