HEJIZ & HEJIZ

The parties in this matter were the applicants, HEJIZ and HEJIZ, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the applicants for the 2015 and 2016 income years. The applicants sought to object to these assessments, and the matter came before Foster J of the Federal Court of Australia.

The primary legal issue before the Court was whether the Commissioner had erred in disallowing the applicants' claimed deductions for expenses incurred in relation to their investment in a film production. Specifically, the Court had to determine if these expenses were incurred in the course of carrying on a business or were otherwise deductible under the relevant provisions of the *Income Tax Assessment Act 1997* (Cth). The Court also considered whether the applicants had engaged in a profit-making scheme, and if so, whether the expenses were deductible in that context.

Foster J found that the applicants had not established that they were carrying on a business in relation to the film investment. His Honour applied the principles established in cases such as *FCT v Radnor*, which consider factors like the scale of operations, the repetition of activities, and the intention to profit. The Court concluded that the activities undertaken by the applicants were more akin to a passive investment rather than the carrying on of a business. Consequently, the expenses were not deductible under the general deduction provisions. The Court also found that while the film investment might have been a profit-making undertaking, the expenses were not deductible as they were not incurred in the course of carrying on a business.

The applications were dismissed.