Piepkorn, Application by

The application before the High Court of Australia concerned an application by Mr Piepkorn for special leave to appeal against a decision of the Full Federal Court. The dispute arose from a decision of the Australian Taxation Office (ATO) to disallow Mr Piepkorn's objection to an assessment of income tax. Mr Piepkorn sought to deduct certain expenses incurred in relation to his participation in a tax avoidance scheme.

The primary legal issue before the High Court was whether the Full Federal Court had erred in its interpretation and application of section 82 of the *Income Tax Assessment Act 1936* (Cth) (the Act). Specifically, the court was required to consider whether the expenses incurred by Mr Piepkorn were deductible under that section, notwithstanding the fact that they were incurred in connection with a scheme designed to avoid tax. The court also considered whether the Full Federal Court had correctly applied the principles established in *FC of T v. Slutzkin* (1977) 140 CLR 315.

The High Court, in dismissing the application for special leave, indicated that it did not consider there to be any error of law in the decision of the Full Federal Court. The Full Federal Court had found that the expenses were not deductible because they were incurred in connection with a scheme that was primarily designed to obtain a tax benefit, and therefore did not have the character of an outgoing incurred in gaining or producing assessable income. The court affirmed that the purpose for which an expense is incurred is a critical factor in determining its deductibility under section 82 of the Act.