Roy Morgan Research Pty Ltd v Commissioner of Taxation & Anor

Roy Morgan Research Pty Ltd (Roy Morgan) sought judicial review of a decision by the Commissioner of Taxation (Commissioner) to disallow its objection to an assessment of income tax for the 2005 income year. The dispute concerned the deductibility of certain expenses incurred by Roy Morgan in relation to its acquisition of a business. The matter was heard by the Full Federal Court of Australia.

The primary legal issue before the Full Federal Court was whether the expenses incurred by Roy Morgan in acquiring the business were capital in nature, and therefore not deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth), or whether they were incurred in the course of gaining or producing assessable income, making them deductible. Specifically, the court had to determine the character of the expenditure in light of the established principles for distinguishing between capital and revenue outgoings.

The Full Federal Court held that the expenses were capital in nature. The court applied the principles established in cases such as *Sun Newspapers Ltd v Federal Commissioner of Taxation* and *CPC Consolidated Pty Ltd v Commissioner of Taxation*, focusing on the purpose for which the expenditure was incurred. The court found that the expenditure was directed towards acquiring an asset, namely the business itself, which was a capital asset. The acquisition of the business was seen as a structural change to Roy Morgan's profit-making apparatus, rather than an expense incurred in the day-to-day operation of its business. Therefore, the expenses were not deductible as revenue outgoings.

The Full Federal Court dismissed Roy Morgan's appeal and affirmed the Commissioner's assessment.