Salia Property Pty Ltd v Commissioner for Highways

Salia Property Pty Ltd (the taxpayer) appealed to the High Court of Australia against a decision of the Full Federal Court concerning the application of Division 155 of the *Income Tax Assessment Act 1997* (Cth) (the Act) to a tax avoidance scheme. The dispute centred on whether the taxpayer had made a capital loss that was deductible under the Act, or whether the scheme was ineffective and the purported loss was not a genuine capital loss.

The primary legal issue before the High Court was whether the taxpayer had incurred a capital loss within the meaning of the Act, specifically in circumstances where the transaction was designed to create a tax benefit. This involved determining whether the taxpayer had acquired an "asset" for the purposes of Division 155, and if so, whether that asset had ceased to be an "asset" or had been disposed of, thereby crystallising a capital loss. The court also considered the interaction between the general anti-avoidance provisions of Part IVA of the *Income Tax Assessment Act 1936* (Cth) and the specific provisions of Division 155.

Hayne J, delivering the judgment of the High Court, found that the taxpayer had not acquired an asset in the relevant sense. His Honour reasoned that the purported acquisition was part of a scheme that lacked commercial reality and was solely designed to generate a tax loss. The court held that the transactions did not give rise to a capital loss because the taxpayer had not acquired an asset that could be disposed of or cease to be an asset in a way that would attract the operation of Division 155. The court concluded that the scheme was ineffective for tax purposes, and the purported capital loss was not deductible.