Victory for Sham Victim
In a recent case, the AAT held that a taxpayer who was the victim of a sham was entitled to deduct interest and bank charges incurred on loans.
The taxpayer was a guarantor for a loan extended to a company. The company defaulted on the loan. The taxpayer then realised that he was the victim of a scam. To fulfil his obligations under the guarantee, the taxpayer took out two loans secured against his property.
The Tribunal said the guarantee was a liability the taxpayer accepted for the purpose of deriving assessable income. Therefore, it allowed the taxpayer’s claim for deductions.
