CREIGHTON & CREIGHTON

In the matter of CREIGHTON & CREIGHTON, the parties involved were the applicants, Creighton & Creighton, and the respondent, the Commissioner of Taxation. The dispute concerned the deductibility of certain expenses incurred by the applicants, which the Commissioner had disallowed. The case was heard by Judge Hartnett in the Federal Court of Australia.

The primary legal issue before the Court was whether the expenses incurred by Creighton & Creighton in relation to the acquisition of shares in a company were deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth). Specifically, the Court had to determine if these expenses constituted a loss or outgoing incurred in gaining or producing assessable income, or if they were necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

Judge Hartnett reasoned that the expenses were not deductible. His Honour applied the principles established in cases such as *Sun Newspapers Ltd v Federal Commissioner of Taxation* and *Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd*, which distinguish between capital and revenue outgoings. The Court found that the expenses were of a capital nature, relating to the establishment of a business structure rather than the carrying on of an existing business. Therefore, they were not deductible under section 8-1.

The Court ordered that the application be dismissed and that the applicants pay the respondent's costs.