Newsletter
September 2014 Newsletter
Bad debt deduction for unpaid trust entitlements refused
A taxpayer has been unsuccessful before the AAT in a matter concerning bad debt deduction claims for the 2012 income year in relation to certain trust distributions. The taxpayer, a beneficiary of a trust, had claimed bad debt deductions under the tax law for debts he argued were unpaid trust entitlements. He argued the debt written off had the same character as the trust distributions included in his assessable income in the 2005 and 2007 income years. Following analysis of the distribution transaction and the trust deed, the AAT was of the view the taxpayer’s entitlement was paid in the manner prescribed by the deed, and once paid, lost its character as unpaid entitlement. The AAT concluded the debt written off was different in character to the income included in the taxpayer’s assessable income in the 2005 and 2007 income years.