Spriggs v Federal Commissioner of Taxation

The High Court of Australia heard appeals from the Full Court of the Federal Court concerning the deductibility of management fees paid by professional athletes. The appellants, a professional Australian Rules football player and a professional rugby league player, each paid a fee to their manager for negotiating playing contracts with new clubs. The dispute centred on whether these management fees constituted allowable deductions under section 8-1 of the *Income Tax Assessment Act 1997* (Cth).

The primary legal issues before the High Court were whether the management fees were outgoings "incurred in gaining or producing" assessable income, or "necessarily incurred in carrying on a business for the purpose of gaining or producing" assessable income, as provided by section 8-1(1). Additionally, the Court had to consider whether the fees were excluded from deductibility under section 8-1(2)(a) as an outgoing of a capital or capital nature. A related question was whether the appellants were carrying on a business of exploiting their sporting prowess and associated celebrity, and the relevance of the exclusion of an "occupation as an employee" from the definition of "business" in section 995-1.

The High Court reasoned that the management fees were not outgoings of a capital nature, and therefore section 8-1(2)(a) did not preclude their deductibility. The Court found that the fees were revenue expenses incurred in the ordinary course of gaining assessable income. The appeals were allowed, the orders of the Full Court were set aside, and the appeals to the Full Court were dismissed, restoring the orders of the primary judge.