Lambrick & Lambrick

In *Lambrick & Lambrick*, the parties were the applicants, Mr and Mrs Lambrick, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the applicants for the 2015 income year, specifically relating to the deductibility of certain expenses. The matter came before Fowler J of the Federal Court of Australia.

The primary legal issue before the Court was whether the expenses incurred by the applicants in relation to their participation in a scheme involving the acquisition and disposal of units in a managed investment scheme were deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth). This involved determining whether the expenses were incurred in gaining or producing assessable income, or were necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

Fowler J reasoned that the applicants had failed to establish that the expenses were deductible. His Honour applied the principles established in cases such as *FCT v. Roxy Trading Co Pty Ltd* and *FCT v. Ilbery*, which require a close connection between the expenditure and the derivation of assessable income. The Court found that the scheme was primarily designed to generate tax benefits rather than genuine assessable income, and therefore the expenses were not deductible. The applicants' argument that they were carrying on a business was also rejected, as the activities undertaken did not constitute a business in the ordinary sense.

The Court therefore upheld the Commissioner's assessment and dismissed the applicants' appeal.