Commissioner of Taxation of the C of A v ANZ Banking Group - [1994] HCATrans 27

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M41 of 1994

B e t w e e n -

THE COMMISSIONER OF TAXATION
OF THE COMMONWEALTH OF
AUSTRALIA

Applicant

and

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LTD

Respondent

Application for special leave
to appeal
MASON CJ
BRENNAN J
DAWSON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 SEPTEMBER 1994, AT 9.57 AM

MR F.H. CALLAWAY, QC: May it please the Court, I appear with my learned friend, MR G.T. PAGONE, for the applicant. (instructed by the Australian Government Solicitor)

MR B.J. SULLIVAN: May it please the Court, I appear for the respondent. (instructed by Freehill, Hollingdale and Page)

MR CALLAWAY: If the Court pleases, in our submission the decision below represents a mistaken reading of the authorities that leads to an odd result and has ramifications extending well beyond accident compensation. When I refer to the authorities I refer, on the one hand, to the insurance cases, RACV and Commercial Union and, on the other hand, to Flood and Nilsen. The oddness of the result can perhaps be illustrated best by the weekly payments. The weekly payments may extend for a very long time. They may, quite realistically, go for 10, 20 or 30 years if the employee is totally incapacitated, never returns to work and is a relatively young person, and they will continue until he or she reaches normal retirement age or 65, whichever is earlier.

The decision below enables the taxpayer to make an estimate of the whole of that series of payments and claim is, as a deduction, in the first year. In our submission, that is exactly the kind of odd result that the majority of the Court was concerned to avoid in Coles Myer Finance v The Commissioner of Taxation. Now, I am thinking not just the spreading over the bills and notes, but the example that the members of the Court, other than Justices Deane and McHugh gave of the 10-year bill, and the Court said how inappropriate it would be if one could claim the whole outgoing in the first year.

MASON CJ: But, what is the question of principle that that raises?

MR CALLAWAY: The question of principle is this, Your Honour, that the Full Court has taken Flood and Nilsen to apply to a series of period payments extending for a very long period of time. Flood and Nilsen were concerned with payments of weekly wages by way of leave in the future and said, “You have to wait until it comes home to the taxpayer, no matter how certain it is that they’ll arise in the future.” It is anomalous if the weekly payments which are in lieu of income are income support under the Accident Compensation Act can all be brought to account now. Not discounted to their present value, all brought to account now. We submit that that is a…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Commissioner of Taxation of the C of A v ANZ Banking Group

Details

AGLC: Commissioner of Taxation of the C of A v ANZ Banking Group [1994] HCATrans 27
Case: [1994] HCATrans 27
Decision Date

CaseChat Overview and Summary

The Commissioner of Taxation of the Commonwealth of Australia (the Commissioner) appealed to the High Court of Australia against a decision of the Federal Court of Australia concerning the deductibility of certain expenses incurred by ANZ Banking Group (ANZ). 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 82A of the *Income Tax Assessment Act 1936* (Cth) (the Act).

The High Court was required to determine whether the expenses incurred by ANZ in acquiring shares in a target company, which were then distributed to ANZ shareholders as part of a demerger, constituted outgoings of a capital, private or domestic nature. Specifically, the court had to consider whether these expenses were incurred for the purpose of gaining or producing assessable income, or for the purpose of carrying on a business for that purpose, as contemplated by section 82A of the Act.

The court reasoned that the expenses were not deductible as they were of a capital nature. Brennan and Dawson JJ held that the acquisition of shares in the target company was an operation of a capital character, undertaken to facilitate the demerger and restructure ANZ's business. The purpose of the expenditure was to achieve a capital reorganisation rather than to produce assessable income in the ordinary course of business. Consequently, the expenses did not fall within the ambit of section 82A, which requires outgoings to be of a revenue nature to be deductible.

Orders