Com of Tax v Consolidated Press

The Commissioner of Taxation (the Commissioner) appealed to the High Court of Australia against a decision of the Full Federal Court concerning the deductibility of certain expenses incurred by Consolidated Press Holdings Limited (Consolidated Press). The dispute centred on whether these expenses, incurred in connection with the acquisition of shares in a company that was subsequently demerged, were deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth).

The High Court was required to determine whether the expenses incurred by Consolidated Press in acquiring shares in a target company, which were then distributed to Consolidated Press's shareholders as part of a demerger, constituted outgoings incurred in gaining or producing assessable income, or outgoings necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. A further issue was whether these expenses were of a capital, or of a capital, nature and therefore not deductible.

The Court reasoned that the expenses were incurred for the purpose of restructuring the company's business operations, specifically to facilitate a demerger. While the acquisition of shares was a step in this process, the ultimate purpose was not the acquisition of an income-producing asset in the ordinary sense, but rather a reorganisation of the corporate structure. The High Court applied the principles established in cases such as *Sun Newspapers Ltd v Federal Commissioner of Taxation* and *CPC Consolidated Pty Ltd v Commissioner of Taxation*, distinguishing between expenses incurred in the process of carrying on a business and those incurred in establishing or restructuring the business itself. The Court found that the expenses were capital in nature, relating to the structure of the company's enterprise rather than its day-to-day operations, and thus were not deductible.

The appeal was allowed, and the decision of the Full Federal Court was set aside.