Raftland Pty Ltd as Trustee for the Raftland Trust v Commissioner of Taxation

Raftland Pty Ltd as Trustee for the Raftland Trust (Raftland) appealed to the High Court of Australia against a decision of the Full Federal Court, which had affirmed a decision of the Administrative Appeals Tribunal (AAT). The dispute concerned the deductibility of certain expenses incurred by Raftland in relation to a property development project.

The primary legal issue before the High Court was whether the expenditure incurred by Raftland, which was primarily for the acquisition of land and associated costs, constituted a capital expense or a revenue expense for the purposes of the *Income Tax Assessment Act 1936* (Cth). Specifically, the court had to determine if the expenditure was incurred in the course of carrying on a business, or if it was an investment of capital.

The High Court, in a joint judgment, affirmed the principles established in *Sun Newspapers Ltd v Federal Commissioner of Taxation* and *Kefford Corporation Ltd v Federal Commissioner of Taxation*. Their Honours held that the expenditure was of a capital nature. The court reasoned that the acquisition of land for development, in circumstances where the land was not acquired as part of a profit-making scheme entered into in the ordinary course of a business, was an outlay of capital. The intention of the taxpayer at the time of acquisition was crucial, and the evidence indicated that the expenditure was for the acquisition of an enduring asset, rather than for the purpose of trading in land. The fact that the land was subsequently developed and sold did not, in itself, convert a capital outlay into a revenue one.

The appeal was dismissed.