Amalgamated Zinc (De Bavay's) Ltd v Federal Commissioner of Taxation

The High Court of Australia heard an appeal from Amalgamated Zinc (de Bavay's) Ltd. (the appellant) against an assessment of income tax by the Federal Commissioner of Taxation (the respondent) for the years ended 30 June 1933 and 1934. The dispute concerned the appellant's entitlement to deduct compulsory contributions made to a fund established under the Workmen's Compensation (Broken Hill) Act 1920 (NSW) from its assessable income in years after it had discontinued its business operations.

The legal issues before the court were whether the compulsory contributions to the compensation fund constituted an outgoing "actually incurred in gaining or producing the assessable income" within the meaning of section 23(1)(a) of the Income Tax Assessment Act 1922-1934, or if they could be deducted as a loss made "in carrying on a business" under section 26 of the same Act. The appellant had ceased its primary business of treating tailings and producing zinc concentrates in 1924, and by 1929 had disposed of its plant and machinery. The assessable income in the relevant years was derived from investments.

The court reasoned that the payments to the compensation fund were not outgoings actually incurred in gaining or producing the assessable income of the years in question, as the appellant's income-producing operations had ceased. While acknowledging that in continuing businesses, expenditure might be deductible even if it produced income in future years, this principle did not apply where the business operations had completely ceased. Furthermore, the court found that the payments did not constitute a loss made "in carrying on a business" under section 26, as the appellant was no longer engaged in business operations that generated the liability for these payments.

The High Court dismissed the appeal, holding that the appellant was not entitled to deduct the contributions to the compensation fund from its assessable income for the years in question. The appellant was ordered to pay the costs of the appeal.