Hart v Commissioner of Taxation [2002] FCAFC 222

FEDERAL COURT OF AUSTRALIA

Hart v Commissioner of Taxation [2002] FCAFC 222

INCOME TAX – whether taxpayer entitled to a deduction of compound interest on a split loan taken for purchase of a new family home while retaining former family home as a rental property – whether compound interest, like ordinary interest, an allowable deduction under s 51(1) Income Tax Assessment Act 1936 (Cth) or s 8-1 Income Tax Assessment Act 1997 (Cth). INCOME TAX – whether loan arrangement where split into a home loan portion and an investment loan portion resulting in an overall tax benefit is a scheme to which Pt IVA Income Tax Assessment Act 1936 (Cth) applies – dominant purpose considered having regard to the eight factors in s 177D(1) Income Tax Assessment Act 1936 (Cth) – commercial purpose of transaction weighed against income tax advantage.

Income Tax Assessment Act 1936 (Cth) ss 51(1), 177A(1), 177C(1), 177D, 177F(1) Income Tax Assessment Act 1997 (Cth) s 8-1

Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 cited Handley v Federal Commissioner of Taxation (1981) 148 CLR 182 cited Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177cited Fletcher v Federal Commissioner of Taxation (1991) 173 CLR 1 discussed Ure v Federal Commissioner of Taxation (1981) 34 ALR 237cited Federal Commissioner of Taxation v Phillips (1978) 20 ALR 607 cited Federal Commissioner of Taxation v Roberts & Smith (1992) 37 FCR 246 cited Magna Alloys and Research Pty Ltd v Commissioner of Taxation (1980) 49 FLR 183 discussed Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 referred to Inland Revenue Commissioners v Brebner [1967] 2 AC 18 discussed Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 discussed Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 179 ALR 625 cited Eastern Nitrogen Ltd v Federal Commissioner of Taxation 2001 ATC 4164 considered Attorney-General's Department v Cockcroft (1986) 10 FCR 180 cited Frank Lyon Co v United States (1978) 435 US 561 referred to Metal Manufactures Ltd v Federal Commissioner of Taxation 99 ATC 5229 referred to Federal Commissioner of Taxation v Metal Manufactures Ltd 2001 ATC 4152 considered