Glennan v Commissioner of Taxation S195/2002

Glennan and the Commissioner of Taxation were the parties in this matter before the High Court of Australia. The dispute concerned the deductibility of certain expenses incurred by the taxpayer, Mr Glennan, in relation to his acquisition of shares in a company. The Commissioner disallowed these deductions, leading to the taxpayer's appeal.

The central legal issue before the High Court was whether the expenses incurred by Mr Glennan in acquiring shares in a company, which were then immediately transferred to a trust, were deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth). This involved determining whether the expenditure was incurred in gaining or producing assessable income, or in carrying on a business for the purpose of gaining or producing assessable income, and whether it was of a capital, or of a capital, nature.

The High Court held that the expenses were not deductible. Their Honours reasoned that the expenditure was of a capital nature, as it related to the acquisition of an asset (the shares) which was fundamental to the structure of the taxpayer's investment. The immediate transfer of the shares to a trust did not alter the capital nature of the initial acquisition. The Court applied the principles established in cases such as *Sun Newspapers Ltd v Federal Commissioner of Taxation* and *CPC (Australia) Pty Ltd v Federal Commissioner of Taxation*, which distinguish between outgoings on revenue account and those on capital account. The Court found that the expenditure was not incurred in the course of carrying on a business, nor was it incurred in the process of producing assessable income, but rather in the establishment of the structure for producing income.

The appeal was dismissed.