Interest payable on borrowed funds or on amounts owing by reason of the operation of the law (for example interest that may be payable on statutory debts such as tax owing) in relation to an income earning activity is a significant (potential) deductible expense throughout the Commonwealth. The traditional “form” approach derived from the leading decision IRC v Duke of Westminster [1936] AC 1 requires that the underlying transaction giving rise to the interest, and the interest itself, be characterised according to the legal rights and obligations created evident from the objective intention of the parties. On the other hand, an “economic substance” approach allows for the same characterisation to arise having regard to the economic consequences that flow from the transaction. These issues have been considered and the movement towards the development of a conceptual framework which relies on commercial legal forms and absorbs this into its measurement and recognition basis.