Commissioner of Taxation v Jones [2002] FCAFC 41; [2002] FCA 204

Commissioner of Taxation v Jones [2002] FCAFC 41 Commissioner of Taxation v Jones [2002] FCA 204

NOTE: CHANGES TO THE MEDIUM NEUTRAL CITATION (MNC) The Federal Court adopted a new medium neutral citation (FCAFC) for Full Court judgments effective from 1 January 2002. Single Judge judgments will not be affected and will retain the FCA medium neutral citation. The transitional arrangements are as follows: * All Full Court judgments delivered prior to 1 January 2002 will retain the FCA medium neutral citation.

* All Full Court judgments delivered between 1 January 2002 to 30 April 2002 have been assigned parallel medium neutral citations in both the FCA and FCAFC series.

* All Full Court judgments delivered from 1 May 2002 will contain the FCAFC medium neutral citation only.

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Jones [2002] FCA 204

INCOME TAX ‑ Allowable deductions ‑ Interest ‑ Fixed term loan taken out while business being conducted ‑ Repayable at any time during term ‑ Penalty payable if repaid during first two years ‑ Husband and wife partnership business ‑ Husband dies during currency of loan ‑ Partnership determines and business ceases ‑ Wife continues to pay interest ‑ Financially unable to repay loan ‑ Later refinances in order to obtain lower interest rate ‑ Deductibility of interest after cessation of business. Income Tax Assessment Act 1936, s 51(1) Income Tax Assessment Act 1997, s 8‑1 Federal Commissioner of Taxation v Riverside Road Lodge Pty Ltd (1989) 23 FCR 305 considered Steele v Deputy Commissioner of Taxation (1999) 197 CLR 459 cited Federal Commissioner of Taxation v Smith & Roberts (1992) 37 FCR 246 cited Federal Commissioner of Taxation v Brown (1999) 99 ATC 4,600 considered Federal Commissioner of Taxation v Midland Railway Co of WA Ltd (1952) 85 CLR 306 cited COMMISSIONER OF TAXATION v DOROTHY JONES Q 193 OF 2001 BEAUMONT, FINN and SUNDBERG JJ 8 MARCH 2002 MELBOURNE