Greig v Commissioner of Taxation

In this case, Mr Greig appealed the decision of the Commissioner of Taxation in relation to the disallowance of tax deductions he claimed for losses and legal fees associated with his investment in shares of a company called Nexus. The primary judge had rejected Mr Greig's claims, finding that his acquisition of the shares was not made in a business operation or commercial transaction and that he had not been carrying on a business of dealing in Nexus shares. The primary judge also found that the losses and legal fees were not deductible under section 8-1 of the Income Tax Assessment Act 1997. The Federal Court allowed Mr Greig's appeal, finding that the primary judge had erred in his consideration of whether the taxpayer's acquisition of the shares was made in a business operation or commercial transaction. The Court found that the acquisitions were not made in a business operation or commercial transaction within the meaning of the principle established in Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199. However, the Court found that the losses and legal fees were deductible under section 8-1 of the ITAA97 as they were necessarily incurred in gaining or producing assessable income. The Court held that the losses and legal fees were incurred in the course of a series of transactions which were made for the purpose of profit, and that they were incurred in gaining or producing assessable income. The Court found that the shares had been held by Mr Greig on revenue account and that they were purchased in circumstances which were akin to, or indistinguishable from, an ordinary investment engaged by a private investor. The Court also found that the losses and legal fees were incurred in carrying on a business and were therefore deductible under subsection 8-1(1)(b) of the ITAA97. The Court ordered that the appeal be allowed, the orders made by the Court on 20 July 2018 be set aside and in lieu thereof, it be ordered that the appeal against the objection decision dated 9 May 2017 be allowed. The matter was remitted to the respondent to take such further administrative action as was necessary to give effect to these orders. The Court also ordered that the respondent pay the appellant's costs of the appeal and of the proceeding before the learned primary judge, to be taxed in default of agreement.