DEBONO & DEBONO

The parties to this proceeding were the applicants, Mr and Mrs Debono, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the applicants for the 2014 income year, specifically relating to the deductibility of certain expenses incurred by Mr Debono in his capacity as a director of a company. The matter came before Macmillan J of the Federal Court of Australia.

The primary legal issue before the Court was whether the expenses claimed by Mr Debono as a deduction under section 8-1 of the *Income Tax Assessment Act 1997* (Cth) were properly allowable. This involved determining whether the expenses were incurred in gaining or producing assessable income, or whether they were necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. The Commissioner had disallowed the deductions on the basis that the expenses were private or domestic in nature, or alternatively, that they were not incurred in the course of carrying on a business.

Macmillan J applied the principles established in cases such as *Ronpibip Tin Dredging Co Ltd v Federal Commissioner of Taxation* and *Lunney v Federal Commissioner of Taxation*. His Honour considered the nature of the expenses and their connection to Mr Debono's role as a director and his business activities. The Court found that the expenses, which included travel and accommodation, were not sufficiently connected to the gaining or producing of assessable income in the context of Mr Debono's directorship. His Honour concluded that the expenses were more akin to private outgoings, even if they had some incidental connection to his business affairs.

The Court therefore dismissed the application and affirmed the Commissioner's assessment.