Federal Court of Australia Commissioner of Taxation v Healius Ltd [2020] FCAFC 173 Appeal from: Healius Ltd v Commissioner of Taxation [2019] FCA 2011 File numbers: NSD 36 of 2020 NSD 37 of 2020 NSD 38 of 2020 NSD 39 of 2020 NSD 40 of 2020 Judgment of: JAGOT, MOSHINSKY AND COLVIN JJ Date of judgment: 9 October 2020 Catchwords: TAXATION – appeals from decision dismissing appellant's applications to appeal from objection decisions by Commissioner of Taxation – where lump sum amounts paid to medical practitioners under arrangements to conduct practice from respondent's medical centres – whether primary judge erred in finding lump sum amounts made on revenue account for income tax purposes – whether primary judge erred by adopting narrow conception of nature of business – whether lump sum amounts paid to secure arrangements that formed part of profit-making structure of business – whether accounting treatment of lump sum amounts as goodwill supports claim that lump sum amounts made on capital account – consideration of distinction between capital and revenue expenditure – appeals allowed Legislation: Income Tax Assessment Act 1997 (Cth) s 8-1, Part 3-90 Cases cited: AusNet Transmission Group Pty Ltd v Commissioner of Taxation [2015] HCA 25; (2015) 255 CLR 439 BP Australia Ltd v Federal Commissioner of Taxation (1965) 112 CLR 386 Commissioner of Taxation v Sharpcan Pty Ltd [2019] HCA 36 GP International Pipecoaters Pty Ltd v Commissioner of Taxation [1990] HCA 25; (1990) 170 CLR 124 Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34; (1946) 72 CLR 634 Heavy Minerals Pty Ltd v Federal Commissioner of Taxation (1966) 115 CLR 512 National Australia Bank Ltd v Commissioner of Taxation (1997) 80 FCR 352 Primary Health Care Limited v Commonwealth of Australia [2016] FCA 313 Sun Newspapers Limited v Commissioner of Taxation (1938) 61 CLR 337 Tyco Australia Pty Ltd v Commissioner of Taxation [2007] FCA 1055 Division: General Division Registry: New South Wales National Practice Area: Taxation Number of paragraphs: 188 Date of hearing: 11 and 14 August 2020 Date of last submissions: 11 September 2020 Counsel for the Appellant: G Davies QC with C Peadon Solicitor for the Appellant: Australian Government Solicitor Counsel for the Respondent: M Richmond SC with C Burnett Solicitor for the Respondent: King & Wood Mallesons Table of Corrections 24 August 2021 In the first sentence of paragraph 60, "be" has been inserted before the words "deployed to earn income". ORDERS NSD 36 of 2020 NSD 37 of 2020 NSD 38 of 2020 NSD 39 of 2020 NSD 40 of 2020 BETWEEN: COMMISSIONER OF TAXATION Appellant AND: HEALIUS LTD Respondent order made by: JAGOT, MOSHINSKY AND COLVIN JJ DATE OF ORDER: 9 OCTOBER 2020 THE COURT ORDERS THAT: 1. The appeals be allowed. 2. The orders made by the primary judge be set aside and in lieu thereof it is ordered that: (a) The applicant's appeals be dismissed; (b) The applicant pay the respondent's costs. 3. The respondent pay the appellant's costs of the appeals. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: 1 Healius Ltd, formerly known as Primary Health Care Limited (Primary), is in the business of developing and operating medical centres (Centres). Medical practitioners at the Centres conduct their own practice, but all the facilities and support services they require for their practice, including reception and billing services, are provided by Idameneo (No 123) Pty Ltd (Idameneo), a subsidiary of Primary. A range of health services is provided at the Centres. 2 At all times, Idameneo acted as the trustee of a unit trust in which all the units were held by Primary. As Primary is the head of a tax consolidated group, Idameneo is to be treated as part of Primary for tax purposes by operation of Part 3-90 of the Income Tax Assessment Act 1997 (Cth) (ITAA). 3 As at 1 July 2002 there were 17 Centres. By 30 June 2007 there were 35 Centres. During that period (being five tax years), Idameneo entered into a considerable number of arrangements with medical practitioners, most of whom were general practitioners, concerning the conduct of their practices at the Centres. The balance of the arrangements were made with specialist medical practitioners and dentists. Idameneo also entered into lease arrangements with pharmacists in respect of premises at certain of the Centres. Ancillary health services were also available from the Centres. It appears that in some instances those services were provided by other businesses controlled by Primary. 4 One type of arrangement made by Idameneo concerning the Centres involved the entry into a sale of practice deed and an agreement for the provision of services. Practitioners entering into such arrangements agreed to conduct their medical practice from a Centre for an agreed period, usually five years. Practitioners were also paid a lump sum by Idameneo of the order of several hundreds of thousands of dollars (Lump Sum). In total, 505 Lump Sum amounts were paid by Idameneo under such arrangements during the relevant five year period. 5 The reason for Idameneo paying the Lump Sum amounts is contentious. It is common ground that in almost all instances the documents recording the arrangement reached between Idameneo and the practitioner provided for the practitioner to sell an existing medical practice to Idameneo as a going concern and then for the practitioner to conduct their practice at a Centre. Further, the practitioner agreed not to practise elsewhere during the term of the agreement. The practitioner also agreed to accept a restraint of trade that prevented the practitioner conducting a medical practice within a specified radius and for a specified time whilst conducting, and after ceasing to conduct, a practice at the Centre. 6 Significantly for present purposes, under the arrangements with Idameneo the practitioner also agreed to accept a particular mode of providing medical services at the Centre. Speaking generally, it had the following attributes. Practitioners at the Centres were required to adopt bulk billing. There is also reference in the materials to certain services provided to privately insured patients being required to be provided on the basis of 'no gap' billing. The practitioners were also required to be available to support rosters that allowed for the operation of the Centre on the basis that it may be open seven days a week and 365 days of the year without the need to make an appointment to see a doctor. All services required by the practitioner in order to conduct the medical practice were to be provided by Idameneo including a central reception that handled patient inquiries for all practitioners. Idameneo also assumed responsibility for the rendering and banking of fees and the promotion of the Centre as a place where a range of medical services could be obtained from a single location. 7 Throughout the relevant period, Idameneo carried the value of the Lump Sum payments in its accounts as goodwill. 8 In the above circumstances, the primary judge found that each of the Lump Sum payments was made on revenue account and not on capital account for income tax purposes: Healius Ltd v Commissioner of Taxation [2019] FCA 2011. His Honour found that the accounting treatment adopted by Idameneo for the Lump Sum amounts was not determinative of their character for income tax purposes and that the amounts were properly characterised as payments to win practitioners as customers of the Centres who would then pay ongoing fees to Idameneo rather than payments for rights that formed part of the structure of Idameneo's business. In doing so, his Honour reasoned from findings to the effect that the business of Idameneo was accurately described as providing a comprehensive range of services and facilities to practitioners at its Centres, but did not include the provision of health care services to the public. In effect, his Honour saw the business of Idameneo as being confined to providing premises and services to medical practitioners in return for fees. 9 At issue in the present appeal is whether the primary judge was in error because the Lump Sum amounts are properly viewed as capital in nature. 10 The legal principles to be applied are well established. They emphasise that the task of differentiating between what is revenue expenditure and what is capital expenditure is evaluative and is not dictated by the juristic characterisation of the legal rights with which the expenditure is associated (though the legal character of the rights is not to be disregarded). Further, the task cannot be compartmentalised or divided into a consideration of a list of factors. It requires an overall evaluation of the nature of the payment in the particular case. The cases identify certain characteristics or attributes that often differentiate capital from revenue expenditure. However, they also recognise that there are no established indicia associated exclusively with one but not the other category in all cases. What is required is a practical commercial inquiry that requires a wide survey and exact scrutiny of the taxpayer's activities. 11 Nevertheless, the chief if not critical factor in determining the character of the particular payment is the advantage that the taxpayer sought to secure by making the contentious payments. Hence, it has been emphasised that the inquiry is primarily concerned with what the contentious payment was truly for, as viewed from the perspective of the taxpayer when making the payment. Summary of outcome of the appeal 12 For the following reasons, and with due respect to the careful analysis of the primary judge, the Commissioner has demonstrated that the Lump Sum payments were capital outgoings. That is principally because they were not simply payments to secure medical practitioners as customers who would then pay to use the facilities and support services provided by the Centre. Rather, they were payments made for the practitioner (a) to cease operating an existing practice (or otherwise practising independently of the Centre); (b) to commence trading as part of the Centre by adopting Idameneo's required mode of practice; and (c) during the arrangements as well as thereafter to accept a restraint on establishing a medical practice that would compete with the Centre. 13 Therefore, the arrangements with practitioners for which they were paid Lump Sums were not directed to simply securing each practitioner as a customer of Idameneo. The arrangements were essential to the operation of the Centres because they enabled Idameneo to control the way those medical practitioners conducted their practices from the Centres in all significant respects save for the professional judgments to be made in providing medical services. They enabled the Centres to be operated in a particular manner that was planned and implemented by Idameneo in order to attract patients to the Centres. The arrangements also afforded substantial protection from competition for the business conducted by Idameneo from the Centres by preventing medical practitioners from conducting their practices in close proximity to the Centre for a number of years after they ceased to practice from a Centre. Significantly, the restraint was not concerned with whether those practitioners purchased services from a supplier other than Idameneo, but rather whether they offered medical services to patients in proximity to the Centre. 14 The arrangements enabled Idameneo to earn ongoing revenues that were determined on the basis of a percentage (usually 50%) of the fees rendered by medical practitioners conducting practices at its Centres. As such they were the means by which Idameneo profited from the adoption of a mode of practice by medical practitioners at its Centres that formed an essential part of Idameneo's business structure, a mode of practice that was instigated and directed by Idameneo. Further, commitments from the medical practitioners of the requisite character needed to be in place from the outset in order for each Centre to be opened and operated. The connections then developed by the business conducted from the Centre with patients who sought medical services at the Centre were protected by the restraint. The Lump Sum amounts were paid to put in place that structure and they thereby created and protected the goodwill in the Centres that was associated with the operation of the Centres in the manner required by Idameneo. 15 Fundamentally, the business of operating the Centres depended upon arrangements whereby practitioners were committed to adopting Idameneo's required mode of practice and, for a number of years (up to eight), were unable to establish a practice that would compete with the provision of medical services from the Centre. Securing the commitment of medical practitioners to conduct their practice in the manner required by Idameneo was an essential part of Idameneo's business. Together with the physical assets comprising each Centre, those commitments formed the commercial infrastructure that was then deployed by Idameneo to earn its revenue by attracting patients to its Centres. This was facilitated by the arrangement with each practitioner by which the ongoing payment to be made to Idameneo was a function of the fees rendered to patients. Idameneo's revenue was not confined to the payment of a licence fee for the provision of a place to practise and service fees for reception and other services at agreed rates. Rather, the arrangements made required each medical practitioner to pay an amount determined by reference to the revenue earned by the medical practitioner. Consequently, Idameneo's revenue was a function of the success of each Centre in attracting patients. Its commercial success was linked to whether the mode of practice that it required the medical practitioners at its Centres to adopt was successful in attracting patients. It then protected that commercial interest by the restraint that it required practitioners at the Centre to accept that would restrict where those practitioners could provide medical services but left them entirely free as to the arrangements they might make for the provision of practice services. Significance sought to be given to alleged differences pertaining to the arrangements made between Idameneo and the practitioners 16 Before the primary judge, the case for Primary was conducted on the basis that differences between the 505 transactions pursuant to which the Lump Sum payments were made did not affect Primary's argument. In the language of the primary judge you could pick a canonical example and Primary would be happy for the case to be dealt with on the basis of the example. Further, it was submitted for Primary that the transactions fell into two categories: contracts with individual practitioners and contracts where the practitioner conducted their practice through an independent medical practice company or IMP. The instances where an IMP was involved were described as the 'less common situation' and the cases without an IMP as 'by far the majority'. 17 In accordance with the submission that all of the transactions were the same for all relevant purposes, at first instance the oral submissions for Primary were developed by reference to an example transaction on the basis that it was representative. This course was adopted even though all of the agreements recording the arrangements were in evidence. The chosen example involved documents entered into between Idameneo and a practitioner described by the primary judge as Dr PH that included a sale of practice deed (Sale Deed) and an agreement for the provision of services (Practitioner Contract). Shortly, it will be necessary to set out the key provisions of those two documents which were said to reflect the terms of the arrangements generally made by Idameneo with practitioners. However, at this point it is necessary to consider the significance of the fact that the case for Idameneo was presented to the primary judge on the basis of a single set of documents concluded between Idameneo and a particular practitioner said to be representative of the position for all practitioners who received Lump Sum amounts from Idameneo. 18 Before the primary judge, the Commissioner dealt with the case on the same basis as it was presented by Idameneo. In the course of the Commissioner's case, the primary judge inquired as to whether any of the 505 instances of Lump Sum payments raised different issues and whether the case could be decided on the basis of the example documents that had been presented by Primary, noting the structural difference in those instances where an IMP had been involved as being a matter on which nothing turned. In response, the primary judge was told that there were some cases where a Lump Sum amount was paid in respect of an extension of the arrangement with Primary. Then, in response to a further question from the primary judge as to whether that made a difference, it was submitted for the Commissioner that it did not. Indeed, it was said that if the Commissioner's argument was upheld then it applied to all cases and if it was not then it followed that the payments under the extensions were also not payments on capital account. 19 Senior Counsel for the Commissioner also pointed out two respects in which at least one of the Sale Deeds was not the same as the example in some instances. In response his Honour observed that he did not understand that anyone was putting a separate argument about that particular instance. 20 In submissions for Primary in reply, it was said that the extension payments 'travel with the lump sums themselves', noting that they comprised relatively small amounts. The submission prompted his Honour to ask: 'Just to be clear, your contention is that the extension payments and associated costs … should effectively abide the outcome of the lump sums'. Both parties agreed that to be the position. 21 Consequently, in his reasons, the primary judge explained the position in the following terms (at [13]): Although the individual contracts were not identical in every respect, it was not suggested that any of the difference which did exist between them were material. The hearing was conducted largely by reference to the contracts between Idameneo and one doctor who … I will refer to as Dr PH. 22 Nevertheless, in the course of argument on the appeal there was reference to differences between the circumstances that applied in the various instances where the Lump Sum payments were made. In particular, it was said that a considerable number of the practitioners who entered into the arrangements had existing practices located some distance away from the Centre to which they agreed to relocate. In those instances, it was said to be less likely that existing patients of the practitioner would travel the additional distance required to consult the practitioner. It was also put that although most Lump Sum amounts were paid to practitioners who had an existing practice, in a few instances, Lump Sum amounts were paid to renew agreements with Idameneo. In other instances, Lump Sum amounts were paid to practitioners who did not have an existing practice. These matters were relied upon by Primary to support other submissions to the effect that the Lump Sum amounts were not paid to acquire the goodwill of an existing medical practice or the capital value of the established connections and relationships between those practitioners and their existing patients. 23 There was no application on appeal to depart from the manner in which the case had been conducted below. 24 The primary judge did attach some significance to the fact that some of the practitioners 'did not bring patients from their former practices': at [18]. In an unchallenged finding the primary judge said that this was a matter to be emphasised 'because it shows that the lump sum payments, whilst not necessarily unrelated to the extent of a pre-existing practice, were also by no means driven by that matter alone and, in some circumstances, not at all'. 25 Therefore, it appears that the parties conducted the case on the basis that there was no material difference between the terms agreed between the practitioners and Idameneo in the case of each of the 505 instances where Lump Sum amounts were paid. The fact that some of those arrangements did not involve a practitioner with an existing practice was not material. Therefore, the case was to be approached on the basis that all practitioners entered into a Sale Deed which provided for the sale of a practice. However, it was not the case that it was accepted that in all instances the practice was conducted within a location proximate to the relevant Centre such that it might be expected that patients of the practice would relocate to the Centre. Rather, there were instances where a Lump Sum was paid where it might be expected that patients would not come across to the Centre from the practice the subject of the Sale Deed. 26 In the above context, the case advanced for the Commissioner had three aspects. First, there was reliance upon the terms of the Sale Deeds and the Practitioner Contracts. Second, there was reliance upon the restrictive covenants accepted by the practitioners. Third, there was reliance upon a characterisation of the arrangements as effecting, from a practical perspective, the acquisition by Idameneo of the existing practice of the practitioner, including the goodwill of that practice. The advantages secured by all three matters taken together were said to add to and enhance the structure and the goodwill of Idameneo's business. However, in the manner in which the case was argued, the presence of the third aspect (payment by Idameneo for the goodwill of an existing practice) was not essential to the Commissioner's case. In those instances where, by reason that patients may not come across to the Centre, it could not be said that there was a transfer of any goodwill to Idameneo, the Commissioner still relied on the other two aspects. 27 For reasons given below, the acquisition by Idameneo of the existing goodwill of the practitioner was not an essential part of the arrangement from the perspective of Idameneo. The Lump Sum amounts were paid to secure advantages for Idameneo that added to and enhanced the structure (including the goodwill) of Idameneo's business. Those advantages were afforded to Idameneo by reason of the terms of the arrangements made with practitioners irrespective of whether patients of the practitioner's practice followed the practitioner to the Centre. They were also protected by the restraint. The commercial value of those commitments was greater in those instances where patients might be thought likely to follow the practitioner to the Centre in which case the quantum of the Lump Sum may have reflected that additional benefit, but the presence of that possibility was not essential. 28 The case was conducted on the basis that the benefits sought to be secured by Idameneo from the terms of the arrangement and the restraint were the same in each case in which a Lump Sum amount was paid. Therefore, no significant consequence arises in the appeal from the points of difference raised by Idameneo. The character of the Lump Sum payments from the perspective of Idameneo flowed from the fact that they were paid for the benefits afforded by the terms of the arrangements made with practitioners irrespective of whether there was any acquisition of goodwill from the practitioner. Those benefits were further enhanced where the practitioner had an existing practice that was nearby the relevant Centre. Those practitioners may have received a larger Lump Sum for that reason. But those instances did not alter the nature of the arrangement and its capital character which was the same in all cases. The Sale Deed and the Practitioner Contract 29 Relevantly for present purposes, the Sale Deed with Dr PH contained provisions to the following effect (which referred to Dr PH as the Doctor): (1) The Doctor agreed to sell, and Idameneo agreed to buy the practice of the Doctor 'comprising the goodwill of the practice' and '[a]ll items in the surgery and waiting rooms' of the Doctor's Old Premises (cl 2.1). (2) The parties agreed to execute the Practitioner Contract (cl 2.2 and cl 4.1(a)). (3) The purchase price payable was $350,000, most of which was payable on commencement of practice by the Doctor at the New Premises (cl 2.3 and cl 2.6). (4) The Doctor and Idameneo agreed that the sale of the Doctor's practice was 'the supply of a going concern' and until completion the Doctor 'must conduct [the practice] … efficiently, in a proper, businesslike and professional manner … in order to maintain the goodwill of the practice' (cl 2.7). (5) The Practitioner Contract took effect upon completion under the Sale Deed (cl 4.1(c)). (6) It was expressed to be an essential part of completion that the Doctor commence full time at the New Premises (that is, the nominated Centre) on or before completion (cl 4.1(d)). (7) The Doctor agreed with Idameneo that under the Practitioner Contract he would: (a) render medical services from the New Premises for at least 5 years from the Commencement Date under the Practitioner Contract. The Doctor agrees with the Purchaser that he will render medical services only from the New Premises during that period. This requirement extends the restraint in Clause 5.1. The only exceptions to this are: (i) where the rendering of the medical services is in accordance with any prior specific written permission of the Purchaser given at any time; or (ii) it is the rendering of urgent medical attention as referred to in section 36 of the Act; (b) render medical services from the New Premises, during those 5 years, for no less than 50 hours per week for 48 weeks per financial year. The Doctor is entitled to be absent for up to 4 weeks per financial year, and for the financial year during which the Practitioner Contract commences or terminates this is pro rated; (c) as part of those hours, work not less than: (i) an average of 10 hours on weekend days (Saturday and or Sunday) on 48 weekends each financial year, and (ii) one evening (from 6.00 pm to 10.30 pm) on or between Monday to Friday each week; and (iii) one half of the Christmas and New Year period special rosters (5 days on, 5 days off); and (iv) an equal share of other public holiday period special rosters along with the other practitioners at the New Premises; so as to enable the Purchaser to manage the New Premises as a medical centre which operates efficiently 24 hours a day for 365 days a year; (d) conduct himself in a harmonious way with other practitioners and staff at the New Premises; and (e) use his best endeavours to, ethically and professionally, expand the turnover, profitability, quality and image of the services provided at the New Premises. (cl 4.2). (8) The Doctor must do all things necessary to apply for government grants by which amounts are payable to the Doctor and the parties agree that grant money will be treated as received under the Practitioner Contract (cl 4.5 and cl 4.6). (9) The parties agreed that given that Idameneo is acquiring the goodwill of the practice and the Doctor is to render medical services from the New Premises, as a reasonable protection for the business of Idameneo, the Doctor must not during the next five years or three years after the termination of the Practitioner Contract (whichever is later) render medical services at any place within a radius of 7 kilometres of the Old Premises or the New Premises there being agreed and assessed damages for breach of 50% of the gross fee payable to the Doctor in respect of that medical service (Restraint) (cl 5). (10) The Doctor warranted that gross receipts in respect of medical services rendered by him from the Old Premises for the previous financial year were not less than $380,000 (cl 6.1(a)(i)). (11) If the Sale Deed is terminated for breach by the Doctor then the Doctor must pay to Idameneo $6,416.66 for each month remaining in the period of five years from commencement (cl 8.3). 30 It may be observed that the terms of the Sale Deed are quite specific as to the manner in which Dr PH must conduct his practice from the Centre, particularly as to the hours to be worked, the requirement for cooperation with other practitioners and staff at the Centre, a commitment to the expansion of the turnover of the practice, a commitment to expanding the quality and image of the services provided at the New Premises in general (being the Centre) and a commitment to seek government grants that might apply to medical services rendered to patients at the Centre. 31 The Practitioner Contract went further. Relevantly for present purposes, it provided: (1) Idameneo must, at its cost and expense, supply and maintain to and for the Doctor, 'such administrative services, clerical staff, facilities, plant and equipment as are in the opinion of [Idameneo] necessary for the Doctor to render medical services' from the Centre (cl 3.1). (2) The services and facilities to be provided by Idameneo would include 'the provision of space' within the Centre suitable for the conduct of a professional practice by the Doctor, 'the location of such space being specified from time to time'; the provision of equipment, fittings, furniture and furnishings; maintenance, repair and cleaning; staff, employees and contractors; materials, drugs and medical requisites; stationery and postage stamps; electricity, standard telephone and other necessary public utilities; and the keeping and writing up of accounts and the collection and banking of all fees payable to the Doctor in respect of medical services (cl 3.2). (3) The Doctor must attend at the Centre and render medical services from such location in the Centre as may be specified by Idameneo from time to time and during such hours as are mutually agreed (cl 5.1). (4) The Doctor must use his best endeavours to promote the interests and welfare of 'the practice the Premises' (that is, the Centre) and must diligently observe all lawful directions of Idameneo concerning the operation or management of the Centre and the business conducted from the Centre (subject to matters of professional judgment as to the manner in which medical services are performed) (cl 5.2 and cl 5.3). (5) The Doctor must promptly provide Idameneo 'with all information and documents as [Idameneo] may require at any time in respect of any matter which falls within the ambit of this Deed or touches upon its operation' (cl 5.4). (6) As part of the maintenance of Idameneo's business, the Doctor must record, in the manner and time required by the applicable legislation, on each patient record all information, particulars and details required to be recorded and that all such records remain the property of Idameneo and the Doctor must not make copies of the whole or part of them or remove them for the Centre either during or after the termination of the Practitioner Contract (cl 5.5). (7) The Doctor must not, without the prior permission of Idameneo, have, keep or store in any part of the Centre any possessions unless they relate directly to the normal provision of medical services by the Doctor from the Centre (cl 5.6). (8) Idameneo charges, and the Doctor agrees to pay by way of remuneration for the use of the Centre and the services provided by Idameneo, 50% of all monies banked (and required to be banked) as are directly referrable to medical services rendered by the Doctor (cl 6.1). (9) Upon termination of the Practitioner Contract the Doctor must vacate the Centre and deliver up to Idameneo all of Idameneo's property and all documents which in any way relate to the business carried on by Idameneo including 'patient lists, patient records, brochures, manuals and financial records' (cl 8.2). (10) Idameneo may terminate the Deed on the happening of various specified events one of which was 'in the reasonably held opinion of [Idameneo] the Doctor has committed an act which if true would, in the opinion of [Idameneo], adversely affect the reputation or business of [Idameneo] conducted from [the Centre]' (cl 9.2(b)). 32 It can be seen from the terms in which the obligations of the Doctor are expressed in the Practitioner Contract that they contemplate that Idameneo is itself conducting a business from the Centre and that the Doctor has an obligation to promote the interests and welfare not only of their own practice but also the Centre. Further, the extent of the matters under the control of Idameneo (which include the hours to be worked, the place within the Centre where the Doctor provides medical services to patients, the provision of reception services, the determination of the extent of the services that may be required by the practitioner in order to provide medical services to patients at the Centre, the control of all patient records and the ability to provide directions to the Doctor concerning matters relating to the business conducted from the Centre by Idameneo) mean that it is not apt to describe the arrangements as being confined to the provision by Idameneo to the Doctor of services for the purposes of the conduct of his own medical practice. Rather, apart from the determination of the appropriate manner in which to provide medical services to the patient (which remains a matter solely within the professional judgment of the practitioner) the Practitioner Contract confers upon Idameneo the authority to determine every aspect of the way in which the medical practice of the Doctor is conducted. 33 Further, upon termination, documents relating to the business carried on by Idameneo which are said to include patient lists, patient records and financial records must be delivered up to Idameneo by the Doctor. If indeed the business of Idameneo was confined to the provision of premises and services to practitioners who conducted their own medical practices then it is difficult to see why it might be that the patient lists and the financial records relating to those practices could be said to relate to the business carried on by Idameneo. 34 Plainly, the particular business activities that were facilitated by agreements on the terms of the Sale Deed and the Practitioner Contract had fundamental aspects that were not confined to the supply of services by Idameneo to the practitioners. The practitioners were not mere customers of Idameneo. The terms of the arrangements agreed between them gave Idameneo considerable control over the way in which the practitioners supplied medical services. Further, the agreed terms indicate a view on the part of Idameneo that it conducted a business from the Centres and it needed the assistance of the practitioners to support and promote that business as well as the medical and financial records of the practitioners to continue to conduct that business after the termination of the arrangement with each practitioner. Factual findings by the primary not in dispute on appeal 35 The primary judge made the following unchallenged findings as to how the Lump Sum amounts were calculated (at [16]-[19]): The basic principle was that the fees were determined by the late Dr Bateman, the Applicant's former chief executive officer. But Mr Duff, as the chief financial officer, was familiar with what Dr Bateman's methods had been and he gave evidence about them. There was no precise formula but there were various relevant factors. One was the number of hours the doctor promised to work at the medical centre. A doctor who agreed to work for 50 hours per week for five years might receive $400,000 by way of lump sum while 40 hours for the same period might only net the doctor $300,000. Hours could be reduced during the life of the agreement, of course, but there then needed to be a refund of a corresponding portion of the lump sum. This refund obligation is likely in many cases to have made seeking a reduction in hours (and the duration of the agreement) less attractive to the doctors. A second factor for Dr Bateman was the size of the doctor's annual billings in their own practice prior to joining the medical centre together with Dr Bateman's rather unsentimental assessment of how effective and efficient the doctor was. Although Mr Duff did not say explicitly say why billings mattered I think it may be inferred that a doctor who could demonstrate on an historical basis a proven enthusiasm for the generation of fees was a doctor who would benefit Idameneo given that the fees it earned from the doctor - as will be seen - were a function of the doctor's own earnings. The number of patients a doctor had in their previous practice was also relevant in those cases where when the doctor was moving to the medical centre from a nearby location for it was plausible to think that the doctor might bring the patients across to the medical centre, though Mr Duff did not monitor the extent to which that actually occurred. But where the doctor was relocating from further afield this was less important because patients would not tend to travel great distances. A third factor was Idameneo's current appetite for additional doctors at a given medical centre which could fluctuate. Where the number of doctors at a medical centre had for whatever reason dwindled, for example, this increased the appetite of Idameneo for recruitment and it might pay increased lump sums while such a state of affairs persisted. This was with good reason. Mr Duff's evidence showed that the addition of each new doctor to a mature medical centre could, on an annual basis, add an extra $200,000 to $300,000 to Idameneo's bottom line. Nor did this benefit flow necessarily from the patients which a doctor might bring to the medical centre from their former practice. Idameneo was content to engage doctors who did not bring patients from their former practices and still pay them a significant up-front lump sum (though there were also cases where Idameneo paid no lump sum). This was because the doctors would usually build up a significant patient base within three to six months. That doctors might arrive without a patient base could occur because the doctor in question did not have one or because the doctor, as I have already noted, had moved from a sufficiently distant place such that the patients would not follow. This matter is to be emphasised because it shows that the lump sum payments, whilst not necessarily unrelated to the extent of a pre-existing practice, were also by no means driven by that matter alone and, in some circumstances, not at all. What was important from Idameneo's perspective was to have as many doctors in each medical centre or, as Mr Richmond SC for the Applicant delicately put it, it was about 'bodies on seats' which may itself be seen as a matter consistent with the putative addition to Idameneo's bottom line for each additional doctor in its medical centres of $200,000 to $300,000 per annum. It is also consistent with Mr Duff's corresponding evidence that one of the Idameneo's main business concerns was the sourcing of enough doctors to meet patient demand at its medical centres. Further, this ongoing demand was present not only in the case of new medical centres which had only been open for a matter of months but also in the case of medical centres which had been open for some years. Idameneo's ongoing appetite for doctors was driven, however, not only by the direct revenue it would bring to Idameneo. Where there was a shortage of doctors at a medical centre this increased waiting times which led to patient dissatisfaction, loss of patients and therefore a loss of revenue. The reasoning of the primary judge 36 As to whether the Lump Sum amounts were paid by Idameneo to secure arrangements that formed part of the structure of its business, the primary judge reasoned by the following steps: (1) There was no real dispute that Idameneo did not provide health services to the public, that the practitioners did provide such services in the course of their own businesses or that Idameneo's business was providing services to the practitioners. However, there was an issue between the parties as to whether the provision by the practitioners of services to the public was to be seen as part of the business structure of Idameneo (at [31]). (2) The provision by the practitioners of medical services at the medical centres was not a component of Idameneo's business structure (at [33]). (3) The structure of Idameneo's business consisted of the premises from which each Centre operated, the equipment provided to practitioners at those Centres and 'the arrangements by which those services were provided to' the practitioners (at [33]). (4) The nature of Idameneo's business was more accurately described in the prospectus it issued to the market which said that its business was the provision of a comprehensive range of services to practitioners who conduct their own practices and businesses at its Centres and a similar description in its annual report (at [34]). (5) The invoices issued by Idameneo to the practitioners were also suggestive of the existence of two separate businesses because they showed very distinctly the fee payable to Idameneo for its services and the collection of GST on those services which were then treated as an input credit by the practitioners (at [35]). (6) It had been held by the New South Wales Court of Appeal that Idameneo was not liable for the negligence of a practitioner at one of its Centres (at [35]). (7) Idameneo did not acquire the practice or goodwill of the practitioners under the terms of the Sale Deeds (at [36]). The practice of each practitioner was continued from the Centre (at [37]). It was also conceptually impossible for such a sale to occur because Idameneo could not itself provide health services to the public (at [37]). (8) As a matter of legal reality, the benefit that Idameneo derived from arrangements made on the terms of the Sale Deed and Practitioner Contract were two-fold. First, it obtained the promise of the practitioner to work in, and only in, its Centre and so be indentured for five years. Second, it obtained the benefit of the Restraint. This is consistent with the evidence of Mr Duff that the main purpose of the Restraint was to ensure that the practitioners performed their services at the Centres (at [39]). (9) If the Deed of Sale did involve a sale of the practice, then it is difficult to see why there would be a proportionate refund of the Lump Sum in the event of early termination. Yet that was what the Deed of Sale required (at [40]). (10) The principal benefit obtained under the arrangements was the promise to practise only from the Centre with the Restraint being ancillary to that benefit, a matter confirmed by considering other cases in which the nature of the Restraint had been considered (at [41]). (11) The Lump Sums were not paid for the practice of the practitioner or its goodwill. They were paid for the promise by the practitioners to conduct their practice from the Centres and to be bound by the Restraint (at [46], [58]-[62]). (12) The fact that Idameneo accounted for the Lump Sum amounts by including them in the figure for goodwill was not determinative because it was an outcome required by the accounting standards and not any particular perception about the nature of the transactions (at [47], [71]). (13) The submissions for Idameneo were to be accepted (at [54]). They were summarised in the following terms (at [53]): The … lump sum payments were part of a process by which Idameneo operated to obtain regular returns by means of regular outlay. The outgoings had not been paid to establish the structure or organisation of Idameneo's business. The structure and organisation of Idameneo's business was the provision of services, rooms, equipment and facilities to doctors. It was that structure which was then used to generate revenue from the doctors who were then to be seen as its customers. The recruitment of new doctors was not to be seen as adding to that structure but rather as the use by the doctors of that structure for their own purposes and in their own businesses for which they then paid Idameneo fees. Consequently, each lump sum payment was a payment for the winning of a customer … [T]he character of the advantage Idameneo sought was to secure the commitment of each doctor to practice for the specified hours from its medical centre for the five year period of the contract so that Idameneo could earn fees from each doctor. So viewed, it was a payment in pursuit of a five year revenue stream. As such, it was to be seen as a payment to win a customer … (14) The payment of the Lump Sum amounts were to be seen as recurrent and ongoing as Idameneo 'consistently tried to engage doctors to meet its ongoing demand for them' (at [55], [88]). (15) As the Lump Sum amounts were not paid for the acquisition of a business, the authorities to the effect that ordinarily such payments are on capital account do not apply (at [63]). (16) Although a payment for a trade restraint may be a payment on capital account, in this case the Restraint was not the principal object of the payment of the Lump Sum amounts. Rather, they were paid to secure the practitioner's presence at the Centre where they could be charged fees by Idameneo (at [64]-[69]). (17) The Lump Sum amounts were not of an enduring nature as the practitioner was free to go after the end of the five year period and there were instances where Idameneo had to pay further Lump Sum amounts to keep a practitioner at a Centre after five years (at [70], [87]). 37 We observe at this point that the notion that Idameneo had an ongoing demand for doctors appears to be inconsistent with their characterisation as customers of Idameneo. Businesses do not have a demand for customers. They have a demand for the inputs required to provide goods or services to their customers. Likewise, the earlier finding that the sourcing of doctors was to meet patient demand at Idameneo's Centres and that Idameneo had an appetite for doctors that was driven not only by the revenue they would bring but the fact that fewer doctors would lead to patient dissatisfaction. If the practitioners were simply customers of Idameneo who were supplied with the support services needed to conduct their practices then Idameneo would have no concern for whether patients were dissatisfied with the availability of medical services from particular practitioners. With respect to his Honour, these matters belie the characterisation of the practitioners as mere customers of Idameneo as a full and complete explanation of the nature of Idameneo's business. 38 It is also to be noted that although it might be said, as the primary judge did at [88], that Idameneo was 'constantly making the payments to satisfy its need to enlist more doctors', it is the case that during the relevant five year period there was an increase in the number of Centres from 17 to 35. In order to increase the scale of its business to that extent it is to be expected that Idameneo would have to expand its investment in those things that formed part of the structure of the business. Further, it is not uncommon for the capital of a business to require incremental investment of the same kind. A trucking company will need to purchase new trucks and replace them at regular intervals. A retail chain will need to open new stores. In order to open a new Centre with the characteristics that Idameneo required, Idameneo needed a suitable stable of practitioners who were committed to conducting their practices in the manner required by Idameneo. It required more than an appropriate mix of practitioners (in the way that a shopping centre owner may seek to have a mix of tenants to improve the overall attractiveness of the centre), it needed to be able to control matters such as the manner of charging, the way patients would contact the Centre and the roster that the practitioners would adopt. It also needed to ensure their exclusivity, not so as to stop each practitioner competing with other practitioners or to control where they obtained the services they needed to conduct their medical practices, but so that they could not compete with the Centre. Finally, they needed a fee arrangement which meant that the revenue flow to Idameneo would increase as patient flow to the Centre increased. 39 The question at the heart of the appeal is whether the payment of a Lump Sum to a practitioner in order to secure commitments of the kind just described was properly characterised as capital or revenue in nature. Did it generate part of the structure of Idameneo's business that was then deployed for profit-making or was the making of the agreements with each practitioner itself the profit-making activity of Idameneo? Of significance in resolving that question is the extent to which the nature of the business conducted by Idameneo was confined to securing practitioners who would pay fees to Idameneo for services or whether the business involved conducting the Centres themselves in a particular way so as to attract patients to the Centres. In the former case, the practitioners would have the character of customers, in the latter case the arrangements with the practitioners would form an essential part of what must be put in place in order to earn revenue by attracting patients to the Centre which would indicate strongly that those arrangements are part of the structure of the business of Idameneo. 40 The difficulty posed is that the issue is somewhat Janus faced. Undoubtedly, the practitioners are customers of Idameneo who make their own decisions as to the manner in which medical services are provided to patients, being the customers of the medical practitioners. However, in all other respects the manner in which medical services are provided at the Centre is controlled by Idameneo. This makes them, at the very least, unusual customers. The ability of Idameneo as the operator of the Centre to control so much of the way that the practitioners must conduct their practices together with its control over the identity of those practitioners gives it the ability to control the character of the Centre and the attributes of the services that are available from the Centre. Further, the profit earned by Idameneo is a function not of the degree of utilisation by the practitioners of the services provided by the practitioners but of the degree to which patients are attracted to the Centre. In those circumstances, the question is whether, from the perspective of Idameneo, the Lump Sum amounts were paid to secure the custom of each practitioner for five years or whether it was paid to secure the practitioner's exclusive commitment to adopting Idameneo's required mode of practice and an ongoing restraint after leaving the Centre from competing with the Centre. If the latter, then is that commitment properly described as part of the structure of Idameneo's business such that the payment of the Lump Sum amounts is properly viewed as being on capital account? Issues in the appeal 41 Despite the fact that the issue in dispute between the parties boiled down to a single question as to the proper characterisation of the advantage that Idameneo sought to obtain by paying the Lump Sum amounts on the basis of evidence that was not substantially in dispute, the amended grounds of appeal raised some 16 grounds. 42 Grounds 1 and 2 of the appeal simply challenged the correctness of the ultimate decision by the primary judge. The rest of the grounds as set out in the notice of appeal appeared to specify the particular errors alleged. Those grounds, as further articulated in oral argument by the Commissioner, reduced to four substantive propositions, namely: (A) The primary judge erred by adopting an unduly narrow conception of the nature of the business conducted by Idameneo. The primary judge treated the business as the provision of administrative and other services to practitioners when in fact it involved the provision of medical services to the public from the Centres (grounds 7, 8 and 9A, as developed in written and oral submissions). (B) The primary judge erred in finding that the Lump Sum amounts were paid by Idameneo to secure the practitioners as customers and in failing to conclude that the commitments of practitioners to render medical services exclusively from the Centres to the public in accordance with the terms of the Sale Deed and the Practitioner Contract formed part of the profit-making structure of the business of Idameneo because they added to and enhanced the structure and goodwill of Idameneo's business by securing three advantages for Idameneo, namely: (a) the commitment to render services exclusively from the Centres on and subject to the terms of the Sale Deeds and the Practitioner Contracts for a period of years, usually five; (b) the restrictive covenants preventing the medical practitioners from providing medical services from locations other than the Centres for a period of up to eight years; and (c) from a practical perspective, the acquisition of the existing practices of the practitioners, including the goodwill of those practices (grounds 3, 4, 6, 7, 8, 9A, and 10). (C) The primary judge erred in characterising the advantages secured by the Lump Sum payments by reference to whether the restrictive covenants were the principal object for which the payments were made and in finding that the payments were just the other side of the coin to the commitment to work exclusively for Idameneo (and therefore ancillary or subordinate to that commitment) when his Honour ought to have found that they formed part of the whole of the advantages secured by the Sale Deed (ground 9). (D) The primary judge erred in rejecting Idameneo's accounting treatment of the Lump Sum payments as evidence of what was sought to be achieved by the payments (ground 10A). 43 A number of further contentions, enumerated as separate grounds, are really particular aspects of the challenge raised by the Commissioner by Proposition (B) as set out above. They are: (a) the primary judge erred in finding that the advantages secured by the Lump Sum payments were not of an enduring nature (ground 11); (b) the primary judge erred in finding analogies with other cases in which lump sum amounts had been found to be paid on income account (ground 12); (c) the primary judge erred in rejecting the circumstance that each Lump Sum was a one-off payment (ground 13); and (d) the primary judge ought to have held that the Lump Sum payments did not occur as part of a process by which Idameneo operated to obtain regular returns by means of regular outlay (ground 14). These matters are best addressed in dealing with Proposition (B). 44 Finally, ground 5 complains that the primary judge ought to have found that the test of whether an outgoing is incurred on revenue account or capital account primarily depends on what the outgoing is calculated to effect from a practical and business point of view. The primary judge's reasoning is redolent with references to the need to adopt such an approach. The ground is without merit and can be put to one side. Objections raised by Primary concerning the appeal grounds 45 At the hearing of the appeal, Primary maintained that the appeal grounds were confined to a complaint about the findings of the primary judge as to the profit-making structure of Idameneo's business and did not challenge the findings of the primary judge as to the nature of Idameneo's business and it was too late to allow such a challenge. On that basis it was said that the matters described above as Proposition (A) did not arise for consideration in the appeal. It may be accepted that the grounds of appeal did not distinguish between a challenge to the findings by the primary judge concerning the nature of the business conducted by Idameneo (on the one hand) and the findings by the primary judge as to whether the Lump Sum amounts were paid to secure an advantage that formed part of the profit-making structure of Idameneo. Further, the grounds as expressed were focussed upon what the primary judge ought to have found to be part of the profit-making structure of the business conducted by Idameneo. 46 However, it was inherent in the grounds as expressed that they claimed that the provisions of the Sale Deed and the Practitioner Contract added to and enhanced the goodwill of Idameneo's business because the profit-making structure of the business included securing the provision of medical services on the terms of those agreements. If the business of Idameneo was confined to securing the custom of practitioners then there could be no goodwill for Idameneo in the provision of medical services. In that way, the grounds as expressed challenged the primary judge's findings as to the nature of Idameneo's business. 47 Further, it was apparent, at least, from the manner in which matters were presented in the Commissioner's written submissions that part of the reason why it was said that the primary judge erred in the conclusions reached as to the character of the Lump Sum amounts was a complaint about his Honour's findings as to the nature of the business conducted by Idameneo. The description in those submissions of the alleged errors in the reasons of the primary judge commenced in the following terms: First, the learned Primary Judge focused on a distinction between the business conducted by the medical practitioners and the business conducted by Idameneo and erroneously concluded that the provision of medical services to the public from its medical centres did not form part of the Idameneo's business structure: R[33] … Part of Idameneo's business activities was to ensure and cause a range of medical services to be provided from its medical centres. The centres themselves were designed and constructed or renovated by it to provide convenient and centralised medical services to the public. Its business model was such that its revenue was dependent upon, and its quantum determined by, the efficient rendering of medical services to the public. The Sale of Practice agreements provided Idameneo with the binding rights and entitlements required by it for compelling and effecting the provision of medical services by medical practitioners to the public from its medical centres. Those binding rights and entitlements formed part of its business structure. 48 It can be seen that the Commissioner's case involved a claim that the primary judge had erred as to findings about the nature of the business activities conducted by Idameneo by not including the provision of medical services from its Centres as part of those activities. The claim made was that the nature and extent of the business structure of Idameneo was to be ascertained on the basis that Idameneo's business involved ensuring not only that there were medical practitioners at its Centres but that those practitioners were providing medical services. 49 It was submitted by Primary that there was no challenge made in the amended notice of appeal to the following finding expressed in [34] of the reasons of the primary judge: The nature of Idameneo's business was more accurately described, in my opinion, in the prospectus it issued to the market in 1998. That business was the provision of 'a comprehensive range of services and facilities to general practitioners, specialists and other health care providers who conduct their own practices and businesses at its medical centres, licensed day surgeries and specialist clinics'. Similarly, the Applicant's 2005 annual report described the business of Idameneo as being a 'service company for medical, para-medical and related services and a daycare surgery operator'. The annual reports in other years were expressed in similar terms. A brochure provided to doctors who were thinking of moving to one of Idameneo's medical centres described its business in similar terms 'Primary is a service company to practitioners'. 50 It is true that the paragraphs enumerated in the amended notice of appeal do not include [34]. However, those grounds included a claim that the primary judge ought to have found that 'from a business and practical point of view the lump sum payments were made for the advantages which the [Sale Deeds] secured for Idameneo' (ground 6). In the written submissions those advantages were described in the following terms (para 3): The payments secured for Idameneo more than simply the custom of the medical practitioners. They put in place a structure through which Idameneo could compel and effect the provision of medical services to the public from its medical centres, without which Idameneo could derive no profit. The generation of revenue for Idameneo was dependent upon, and its quantum determined by, the rendering of medical services to the public. Moreover, Idameneo's business conducted at its medical centres had its own goodwill. 51 The Commissioner then described the relevant segment of the business of Idameneo as being 'the provision and management of premises and services at its medical centres, from which a range of medical services were provided to the public' (para 6). Later it was submitted that Idameneo 'managed and operated medical centres for the specific purpose, amongst others, of ensuring that a raft of medical services would be provided to the public' (para 12). 52 Despite these submissions, Primary maintained that the findings of the primary judge as to the nature of the business conducted by Idameneo were not challenged by the Commissioner. For the reasons we have given, we do not accept that submission. Matters might have been expressed more elegantly, but the point was there. At its heart, the nature of the complaint about the primary judge's finding about the business structure was, to a significant degree, a complaint that the primary judge took too narrow a view of the nature of the business being conducted by Idameneo. 53 In any event, assuming the contentions for Primary to be correct, the point made would only go anywhere if leave would be refused to amend the grounds of appeal to raise the matters set out in Proposition (A) above. In that regard it is relevant to consider the interests of justice, particularly whether there would be any prejudice to Primary. Any prejudice to Primary can be addressed by allowing further submissions to be made on its behalf. Orders were made allowing those submissions to be filed under cover of the objection raised to the point being advanced by the Commissioner. Those submissions have now been delivered. The submissions provide detailed references to the evidence relied upon by Primary to support the findings made by the primary judge as to the nature of the business conducted by Idameneo. To the extent necessary, we would give leave to allow the matters captured by Proposition (A) to be advanced for the Commissioner in the appeal if we are wrong in the view that the point was already raised by the appeal grounds as explained and developed in the written submissions. The conceptual distinction between capital and revenue expenditure 54 The ITAA defines the losses and outgoings that may be deducted from the assessable income of a taxpayer in determining the tax payable on income earned. Section 8-1(2)(a) provides that a taxpayer 'cannot deduct a loss or outgoing … to the extent that … it is a loss or outgoing of capital, or of a capital nature'. 55 On the other hand, s 8-1(1) provides that a taxpayer can deduct any loss or outgoing to the extent that: (a) it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Expenditure incurred to produce assessable income that is not an outgoing of capital or an outgoing of a capital nature has been referred to as expenditure on revenue account and that usage is adopted in these reasons. 56 Therefore, the legislation sets up the criteria that must be met for a loss or outgoing to be deductible from assessable income. It then excludes from the set of losses or outgoings that meet those criteria, certain categories of loss or outgoing including those that are of capital or of a capital nature. In the present case, the parties are joined on the question whether the Lump Sum amounts should be placed in one box (capital expenditure) or the other (revenue expenditure). 57 The relevant law was summarised in the following terms by French CJ, Kiefel and Bell JJ in AusNet Transmission Group Pty Ltd v Commissioner of Taxation [2015] HCA 25; (2015) 255 CLR 439 at [15]: The distinction between capital and revenue expenditure is readily discerned in cases close to the core of each of those concepts. A once and for all payment for the acquisition of business premises would be treated as an outlay of capital. A rental payment under a lease of the same premises would be treated as an outgoing on revenue account. The distinction is not so readily apparent in penumbral cases. They may require a weighing of factors including the form, purpose and effect of the expenditure, the benefit derived from it and its relationship to the structure, as distinct from the conduct, of a business. Some of those factors may point in one direction and some in another. Definitive and specific criteria are not, and never have been, in abundance in Australia, nor in the decisions of the courts of the United Kingdom in the late nineteenth century and the first half of the twentieth century which have been referred to from time to time in this Court's decisions. Lord Dunedin suggested in 1910 that a distinction between a once and for all payment and a recurrent payment may be 'in a rough way … not a bad criterion of what is capital expenditure … as against what is income expenditure'. Viscount Cave LC in British Insulated and Helsby Cables Ltd v Atherton cautioned that this criterion is not decisive in every case. In that case, the 'once and for all' character of an expenditure was treated as an indicator that it was in the nature of a capital outlay, a fortiori, when made 'with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade'. Even then there might be 'special circumstances' leading to an opposite conclusion. British Insulated and Helsby Cables was long treated in this Court as 'the leading case on the subject'. (citations omitted) 58 As their Honours further explained, 'the fact that a payment can be viewed as part of the consideration for the acquisition of a business or capital asset weighs heavily in favour of its character as a capital outlay. However, … the question must always be asked - was the payment made "for" the acquisition?': at [18]. As is apparent from the reasoning in the following paragraphs in AusNet, those observations do not mean that a payment made in the context of an acquisition of a business can only be capital in nature if it is a payment for the acquisition of the business or a capital asset. A payment may have that character if it is for an asset that will be deployed by the acquirer as part of the business structure of the acquirer even though it has not paid for a transfer of the business to the acquirer. It may even have that character if it is incurred to protect or secure an existing asset but does not make an identifiable addition to capital assets. 59 In the following paragraphs in AusNet, their Honours discussed the proper approach: at [19]-[30]. The analysis emphasised that the usual case was not every case. Close attention is required to all of the particular circumstances of the case. With that overriding caveat, the following may be discerned from the reasoning by their Honours. 60 Expenditure on capital account acquires, produces, sustains or protects something of lasting value that may be deployed to earn income. It may involve the acquisition of an asset or it may involve the securing of an advantage or be protective of the undertaking that is deployed to earn income. It need not result in something tangible. Most expenditure on capital account is not perpetual or everlasting. It will have a limited life. Nevertheless, the nature of capital expenditure is that the advantage it seeks forms the part of the business undertaking that is deployed to earn income without the capital being expended or used up immediately or in the short term. For that reason, assets that result from or are protected by capital expenditure are described as structural because they form part of the structure upon which the existence of the business undertaking depends. Also, for that reason, it is the nature of the expenditure from the standpoint of the party making the payment (the taxpayer) that is relevant. It also means that usually the expenditure will not be regular, ongoing or recurrent and will tend to produce an ongoing longer term benefit that is enduring. However, the diversity of commerce means that it is not possible to identify attributes that are characteristic or must be present. It is for that reason that the inquiry is a practical and commercial inquiry that does not depend upon the juristic classifications of the legal rights that are created or transacted by the activity to which the expenditure relates. It must be informed by the nature of the particular business and what it deploys in order to earn income. 61 On the other hand, expenditure on revenue account seeks no lasting or ongoing value and is used up in earning income. Some expenditure on revenue account will generate property or contractual rights for a time. It may involve the acquisition of something that may be described as an asset or property. However, revenue expenditure does not expand or protect the structure of the business undertaking. Rather, expenditure on revenue account is incurred as part of undertaking the business activity of securing and supplying customers. 62 The distinction was articulated with care by Dixon J in Sun Newspapers Limited v Commissioner of Taxation (1938) 61 CLR 337 at 359-360 in the following terms: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay, the difference between the outlay and returns representing profit or loss. The business structure or entity or organization may assume any of an almost infinite variety of shapes and it may be difficult to comprehend under one description all the forms in which it may be manifested. In a trade or pursuit where little or no plant is required, it may be represented by no more than the intangible elements constituting what is commonly called goodwill, that is, widespread or general reputation, habitual patronage by clients or customers and an organized method of serving their needs. At the other extreme it may consist in a great aggregate of buildings, machinery and plant all assembled and systematized as the material means by which an organized body of men produce and distribute commodities or perform services. But in spite of the entirely different forms, material and immaterial, in which it may be expressed, such sources of income contain or consist in what has been called a 'profit-yielding subject,' the phrase of Lord Blackburn in United Collieries Ltd. v. Inland Revenue Commissioners. As general conceptions it may not be difficult to distinguish between the profit­yielding subject and the process of operating it. In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. The latter can be considered, estimated and determined only in relation to a period or interval of time, the former as at a point of time. For the one concerns the instrument for earning profits and the other the continuous process of its use or employment for that purpose. But the practical application of such general notions is another matter. The basal difficulty in applying them lies in the fact that the extent, condition and efficiency of the profit-yielding subject is often as much the product of the course of operations as it is of a clear and definable outlay of work or money by way of establishment, replacement or enlargement. In the case of machinery, plant and other material objects, this is illustrated by the commonplace difficulty of saying what is maintenance and what are renewals to be referred to capital. But for the same or a like reason it is even harder to maintain the distinction in relation to the intangible elements forming so important a part of many profit-yielding subjects. For example, a profitable enterprise such as the sale of a patent medicine may depend almost entirely on advertisement. In the beginning the goodwill may have been established by a great initial outlay upon a widespread advertising campaign carried out upon a scale which it was not intended to maintain or repeat. The outlay might properly be considered to be of a capital nature. On the other hand the goodwill may have been gradually established by continual advertisement over a period of years growing in extent as it proved successful. In that case the expenditure upon advertising might be regarded as an ordinary business outgoing on account of revenue. More often than not an outlay of capital in establishing an organization or obtaining an asset of an intangible nature does not produce a permanent condition or advantage. Its effects are exhausted over a period of time. In such cases the commercial practice of writing off the expenditure against revenue over a term of years or making a reserve to replace exhausted capital lessens the importance of the contrast. But in the assessment of income for taxation purposes severe limitations are placed upon the application of such a practice, the allowance of which is exceptional. 63 His Honour then dealt with the extent to which a distinction between whether the outlay was 'recurrent, repeated or continual' on the one hand or 'final or made "once for all"' on the other hand must assist in differentiating between the two types of payments: at 361. His Honour described the distinction as an attempt that was by no means successful in articulating the requisite distinction. Rather, it was necessary to go further and consider whether the result or purpose of the expenditure was to 'bring into existence or procure some asset or advantage of a lasting character which will enure for the benefit of the organization or system of "profit-earning subject"'. His Honour concluded that neither recurrence nor the lasting character of the advantage is necessarily determinative: at 362. Such observations are particularly pertinent in the present case. His Honour summarised the position at 363 in the following manner: There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment. 64 As the primary judge observed at [50], since Sun Newspapers the High Court has pointed to the first of these three factors as 'the chief, if not critical, factor in determining the character of what is paid': GP International Pipecoaters Pty Ltd v Commissioner of Taxation [1990] HCA 25; (1990) 170 CLR 124 at 137. 65 Notwithstanding the complexities involved in the individual application of the general principle, it is not a task that is so indefinite and uncertain as to remove the matter from the operation of reason: Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34; (1946) 72 CLR 634 at 646 (Dixon J). In that case the relevant distinction was described by Dixon J as lying: … between the acquisition of the means of production and the use of them; between establishing or extending a business organization and carrying on the business; between the implements employed in work and the regular performance of the work ...; between an enterprise itself and the sustained effort of those engaged in it. 66 Nevertheless, 'the line of distinction is often hard to draw in border line cases; and conflicting considerations may produce a situation where the answer turns on questions of emphasis and degree': BP Australia Ltd v Federal Commissioner of Taxation (1965) 112 CLR 386 at 397. 67 The application of these principles requires an understanding of the nature of the taxpayer's business and the identification of the profit yielding subject or structure of the business, being that which is deployed to earn profits rather than that which forms part of the business activity of earning profits. The distinction was recently expressed by the High Court in Commissioner of Taxation v Sharpcan Pty Ltd [2019] HCA 36 in the following terms at [18] (Kiefel CJ, Bell, Gageler, Nettle and Gordon JJ): Authority is clear that the test of whether an outgoing is incurred on revenue account or capital account primarily depends on what the outgoing is calculated to effect from a practical and business point of view. Identification of the advantage sought to be obtained ordinarily involves consideration of the manner in which it is to be used and whether the means of acquisition is a once-and-for-all outgoing for the acquisition of something of enduring advantage or a periodical outlay to cover the use and enjoyment of something for periods commensurate with those payments. Once identified, the advantage is to be characterised by reference to the distinction between the acquisition of the means of production and the use of them; between establishing or extending a business organisation and carrying on the business; between the implements employed in work and the regular performance of the work in which they are employed; and between an enterprise itself and the sustained effort of those engaged in it. Thus, an indicator that an outgoing is incurred on capital account is that what it secures is necessary for the structure of the business. (footnotes omitted) 68 Application of those principles requires a counterfactual analysis that compares the expected structure of the business after the outgoing with the expected structure but for the outgoing. 'If a once-and-for-all payment is made for the acquisition of an asset of enduring advantage which, once acquired, forms part of the profit-earning structure of the business, the payment is incurred on capital account': at [33]. Proposition (A): The nature of the business of Idameneo 69 It was submitted for the Commissioner that in order to understand what formed the structure of the business of Idameneo that it deployed to earn revenue it was necessary to have a proper understanding of the nature of the business conducted by Idameneo. This is an orthodox proposition. It was further submitted, in effect, that the primary judge had adopted an unduly narrow view of the business of Idameneo and that had led to error when it came to evaluating whether the Lump Sum payments were on capital account. Evidence and findings as to the nature of the business of Idameneo 70 It was not in dispute that Idameneo held out the Centres to the public as places where people could come for medical services. Therefore, when a member of the public walked into the reception area at a Centre, the person did so at the invitation of Idameneo. The medical practitioners did not hold a leasehold interest. They were provided with the use of a room as part of the arrangements, but Idameneo retained control over each Centre. It was not the practitioners who did so. 71 Further, it was Idameneo who required the practitioners to be available to receive a patient without an appointment and specified the manner of billing the patient. It was also Idameneo that specified when the Centre would be open. 72 Therefore, even putting to one side the percentage arrangement by which payment was made for the services provided by Idameneo, it was not the case that Idameneo's conduct was confined to ensuring there were practitioners at its Centres who would pay for the services provided by Idameneo. It had specific and comprehensive requirements about the way the medical practitioners conducted their practices and the manner in which charges would be made for the provision of medical services. The nature and extent of these requirements as recorded in the arrangements made with the practitioners is dealt with in more detail below. 73 In addition, the design of each of the Centres was controlled by Idameneo and it determined the nature of the medical services that would be available at the Centre. The practitioners did not have any right to control the identity or nature of the practice of other practitioners at each Centre. 74 Consequently, as the primary judge found, Idameneo had its own goodwill in the business it was conducting from the Centres, being a 'practice goodwill' that 'related to the attractive force of the medical centre itself as a venue for meeting the public's health needs as distinct from the attractive force of any particular doctor': at [61]. This significant finding is unchallenged by way of contention. It is not confined to goodwill associated with the provision of services to medical practitioners. It recognises that the business of Idameneo included a goodwill associated with the drawing power of the Centre itself rather than any particular practitioner. That goodwill formed part of a business structure that depended upon securing the commitments of medical practitioners to adopt the Idameneo way of practising. It was not a product of the physical attributes of the Centre or the quality of the services provided to medical practitioners. It was goodwill that was generated by the mode of practice adopted at the Centres. 75 Further, the primary judge found that Idameneo's goodwill was protected by the restraint of trade clauses that formed part of the arrangement: at [61]. On that basis, his Honour rejected a claim that had been made by the Commissioner that the Lump Sum amounts were paid to acquire any goodwill from the individual practitioners: at [62]. Rather, the primary judge found that 'the payments were for many things, principally increasing the number of doctors working from Idameneo's medical centres'. However, to confine the payment to one being made principally to source enough doctors to meet patient demand, was to fail to consider the whole nature of the arrangement. In particular, it was to ignore all of the attributes that enabled Idameneo to control the mode of practice adopted by the practitioners at its Centres and to promote the Centres as offering medical services that were delivered in a manner that conformed to Idameneo's requirements. The medical aspects of the services were a matter for the practitioner to be exercised in accordance with the practitioner's professional judgment. But the commercial aspects of the manner in which the medical services were provided were controlled by Idameneo through the arrangements. 76 These aspects are implicitly recognised in the further finding by the primary judge at [19] as follows: Idameneo's ongoing appetite for doctors was driven, however, not only by the direct revenue it would bring to Idameneo. Where there was a shortage of doctors at a medical centre this increased waiting times which led to patient dissatisfaction, loss of patients and therefore a loss of revenue. 77 As the finding recognises, the business conducted by Idameneo was concerned with what would deliver patient satisfaction. It was not the case that Idameneo was concerned only with sourcing enough doctors who would pay fees for services provided by Idameneo. Rather, as the evidence summarised below shows, it was concerned with ensuring that the way in which medical services were provided at its Centres to patients, including as to availability of practitioners, caused the Centres to attract as many patients as possible thereby increasing revenue to Idameneo. 78 Prior to the relevant period, Primary had listed on the Stock Exchange. At the time of listing, Primary issued a prospectus. It described the founder of the business as being Dr Edmund Bateman. In a letter from the Chairman of Primary to prospective investors that formed part of the prospectus, the business of Primary was then described in the following terms: Primary … provides a comprehensive range of services and facilities to general practitioners, specialists and other health care providers who conduct their own practices and businesses at its medical centres, licensed day surgeries and specialist clinics. 79 The primary judge adopted that description as an accurate one for the purposes of describing the nature of the business conducted by Idameneo. However, the Commissioner drew attention to other statements in the prospectus which described the 'appeal to patients' and the 'appeal to doctors'. In the section concerned with appeal to patients, the prospectus said: Primary … aims to facilitate the delivery to patients of healthcare services which are: Competitively priced: General practitioners and specialists mostly bulk bill patients through the Medicare system. Where services are not covered by Medicare, reasonable price-for-service is recognised by Primary … as an important service and benefit to patients. Comprehensive: General practitioners and specialists practise across the broad spectrum of medicine. Services are also offered by an extensive range of other health care providers including dentists, chemists and physiotherapists. Convenient: All health care services are available at the one location. Customer Oriented: General practitioners and dentists are available on a 24 hour basis, a courtesy car is available to collect and drop off patients, home visits are offered, patients can choose their own doctor, free parking is available, the centres are generally located in proximity to both residential and shopping areas and their premises and equipment are up-to-date. 80 Under the section concerned with appeal to doctors the prospectus included a statement that: 'Because of the advantage the medical centres offer patients and because the centres are well marketed by Primary …, the medical centres enjoy a strong flow of patients'. It may be noted that this statement focusses upon the Centre and its marketing by Primary as the source of patient flow rather than the reputation of the medical practitioner. 81 Section 3 of the prospectus set out a detailed description of the business of Primary starting with the history of its establishment by Dr Bateman. It described how, through the establishment of medical centres by Dr Bateman, Primary had progressively developed expertise and knowledge in the needs and functions of medical centres. It set out the business philosophy of Primary in the following terms: Primary Health Care has adopted a market driven, customer oriented approach to the provision of services in the health industry which are provided in the context of a traditional family practice. The aim of Primary Health Care is to facilitate the provision of competitively priced and comprehensive quality health care services at the one site. The provision of the services is based on the general practitioners who are the core service providers. Specialists and other healthcare providers support the general practitioners. The health care services offered at Primary Health Care's medical centres cover most forms of medical and para-medical care that can be appropriately managed out of high cost hospital situations. Primary Health Care enables the general practitioners, specialists and others to whom Primary Health Care provides services to make health care available at a cost which is low relative to the cost of providing that care through traditional smaller medical practices. 82 The prospectus then described how Primary 'provides a comprehensive range of services to the health care providers at its facilities. It provides the premises from which the health care providers operate'. Also, how Primary 'markets the centres and provides all administrative services which may be required such as purchasing, accounting' and so on. Then, under the heading 'Existing Facilities' it said: The location of the medical centres, and the services they provide, together with Primary Health Care's marketing strategies, is such that each centre attracts a strong patient flow. This is attractive for general practitioners who are able to build and establish long term practices in Primary Health Care's centres. In turn, this is the basis of an extensive and ongoing referral base for specialist practitioners. Primary Health Care believes it has developed expertise and knowledge in the needs and functions of medical centres and specialist clinics. The accumulation of this expertise and knowledge has been a gradual process since the establishment of the Warringah Mall medical centre in 1985 and has led to improved patient flow and profitability. 83 The prospectus also described the predominant practice in the Centres of bulk billing which it described as a type of fee arrangement that 'will achieve an increase in patient loyalty, efficiency of health care delivery and thus enhanced profitability'. It described one of the strategies of Primary in the following terms: Primary … has the capacity to offer patients who have full private insurance and who source all their health care requirements with health care providers operating from the Company's facilities, fees that are fixed near the rebate levels offered by insurers … predominance of Medicare bulk billing and schedule fees for the services provided at the Company's facilities, patients will have a combination of all predictable health cover for known private and Medicare insurance cost for most medical services provided at the Company's facilities. 84 These descriptions indicate that although Primary did not provide the medical services offered by each practitioner at each Centre, it was essential to its business that a particular mode of practice was adopted by those practitioners. It was a mode of practice that Primary had developed as a matter of its own experience and expertise over many years. It concerned the way in which different services were offered at each Centre and the way the Centre was operated, including the manner in which charges were raised for medical services provided at the Centres. In that regard, the financial statements provided in the prospectus included an amount of over $25 million for goodwill (after allowing for amortisation). 85 The prospectus also described the business philosophy of Primary in the following terms: The aim of Primary … is to facilitate the provision of competitively priced and comprehensive quality health care services at the one site. The provision of the services is based on the general practitioners who are the core service providers. Specialists and other health care providers support the general practitioners. The health care services offered at Primary Health Care's medical centres cover most form of medical and para-medical care that can be appropriately managed out of high cost hospital situations. 86 It then went on to refer to Primary enabling those practitioners to make health care services available at a cost which is low relative to traditional smaller medical practices. 87 These statements characterise the business of Primary as being concerned with both the nature and price of the medical services offered at the Centres which are in turn described as Primary's medical centres. It is concerned not only with the services provided to practitioners, but also the offering of medical services at the Centres. By its own activities it seeks to attract patients to each of its Centres. 88 Before the primary judge, evidence was given by Mr Andrew Duff. During the relevant time he was the chief financial officer of Primary. He was not personally involved in the negotiation or drafting of the agreements made with practitioners. By the time of the hearing before the primary judge, Dr Bateman who had been involved had passed away. However, hearsay evidence was allowed as to what Dr Bateman had told Mr Duff about the negotiation of the arrangements with individual practitioners. That evidence formed the basis for findings by the primary judge that have already been quoted. 89 In his affidavit evidence Mr Duff described the business of Primary as being to provide services to medical, dental and other health professionals, principally through the operation of medical centres. He said that Primary was a pioneer 'in the operation of large scale medical centres in Australia'. He said that at each Centre, Idameneo provided support services, including administrative services, clerical staff, nursing staff, facilities, plant and equipment and premises to enable medical practitioners to conduct their practice. He said that the Centres were set up to enable the practitioners to concentrate on practising medicine rather than the administration of the practice. He referred to the 'medical centre business' conducted by Primary. 90 During cross-examination, Mr Duff agreed that in the period from 2002 to 2007 Primary's activity was to develop and operate medical centres which provided a range of medical and health services to the public. He agreed that the location and construction of each of the Centres had to be of a nature that would enable a variety of health and medical services to be provided to the public. Some were constructed for that purpose and others were renovated. In the majority of instances the Centre provided pathology services and had a pharmacy. Mr Duff agreed that it was Primary who decided what services would be offered to the public from each Centre and that decision then impacted upon the nature of the construction or refurbishment that would take place. 91 Mr Duff was also taken to certain parts of the financial records of Primary. He agreed that year on year comparisons of patient attendances at the Centres was often dealt with in the commentary provided by Primary to the Stock Exchange. He also agreed that was done because the patient attendances were a critical component of the profitability of Primary. He said patient attendance figures would reflect part of the growth of the business. This evidence is consistent with the business seeking to increase patient attendances at the Centres, rather than being confined to an identification of practitioners as the customers of the business conducted by Primary through its subsidiary Idameneo. 92 It was put to Mr Duff that from a commercial point of view it was an objective of Primary to make its premises as attractive to the public for use as possible. Mr Duff responded: 'Yes. They were made to be attractive to doctors, yes, and patients'. Then, he was asked, so far as patients were concerned 'it was represented to patients that there weren't just doctors … at the premises, but there were a variety of related health practitioners who could attend to their needs if they needed them?'. To which Mr Duff responded: 'Correct. Yes'. Then, there was the following series of questions and answers: Primary, in operating the medical centres, did so in a way to assist the patients to be attended to in as an efficient and productive manner as possible?---Yes. The - the systems and processes that are in place are designed to make the practice efficient. Yes. … … it was Primary who put the systems into place, wasn't it, within these medical centres?---It was. Yes. Yes. So, an aspect of the systems was that there was a no appointment system?---Correct. Yes. So, a patient could walk - if they felt unwell, could immediately go down to the - a medical centre and then be seen by the next available doctors?---Yes. Most were seen by the - they would select a doctor to choose…But they could see… a doctor, yes. Yes. And that was one of the benefits, was it not, that Primary wanted to give to the public about the particular services being offered at Primary Health Care centres?---Yes. It was accessible. Yes. Yes. Accessible. And the other thing was bulk billing. It was a practice, was it not, that, where available, patients would be bulk billed as opposed to being not bulk billed?---Yes. Correct. Yes. And that decision to bulk bill, that was one that Primary made, wasn't it?---Yes. So, in Primary's ongoing relationship with the doctors, the doctors were not given the opportunity to determine for themselves whether they could bulk bill or not bulk bill?---Correct. And so - and the process of bulk billing was seen by Primary as being an additional benefit of the - provided by medical centres of Primary Health that would encourage members of the public to come to their centres to seek services?---There was a number of reasons. That was one of them. Yes?---Yes. That was one of them?---Yes. Yes. Could you elaborate on others that Primary adopted - - -?---Yes. They were… extended opening hours. Yes?---So accessible - From 7 or 8 o'clock in the morning every day. So that was another major attraction. Yes. Yes. So just on extended opening hours, it was from, what, 7 in the morning through to about 10 at night?---Correct. Yes. And seven days a week?---That's right. Yes. And in order to enable the provision of services over those hours and days each year, that was one of the reasons, was it not, why, in the sale of practice agreement, the practitioner was required to agree to work hours to enable Primary Health to maintain its medical centres as operating for extended hours seven days a week for 52 weeks of the year?---Yes, that's one of the reasons. Yes. 93 There are a number of references in the documents to the doctors and other health care providers at the Centres conducting their own practices and other businesses at the Centres and to Primary facilitating the operation of those practices at lower cost than would be the case in operating a smaller medical practice. 94 The Commissioner also placed reliance upon evidence that was before the primary judge concerned with negotiation by Idameneo of arrangements with particular practitioners. That evidence was mainly concerned with isolated dealings with a few practitioners. The content of those dealings did not take matters further than the other evidence to which reference has been made. The reasoning of the primary judge concerning the business of Idameneo 95 The primary judge found that the commercial reality of Idameneo's arrangements suggested that the real business being conducted by Idameneo did not include the provision of health care services to the public: at [36]. His Honour accepted the submission by Primary that the structure and organisation of Idameneo's business was the provision of services, rooms, equipment and facilities to doctors: at [53], [54]. 96 The primary judge reasoned in the following way as to the extent of the business structure deployed by Idameneo to earn profits (at [57]): It is therefore necessary to ask what Idameneo made the lump sum payments for (that is, the character of the advantage sought by the payment) and then to ask whether it was made for something which was part of Idameneo's profit-yielding structure … The identification of what is to be acquired by an outgoing 'ultimately requires a counterfactual, not an historical, analysis: specifically, a comparison of the expected structure of the business after the outgoing with the expected structure but for the outgoing, not with the structure before the outgoing' … Applying that approach, what existed after the lump sums were paid was the medical centres with their various facilities. If the lump sums had not been paid, Idameneo's business structure would still have consisted of the medical centres and their facilities although if none of them had been paid the medical centres would no doubt have had the feel of the Mary Celeste. But, and this is the point, a business structure without customers is just as much a business structure in the same way that a yacht without passengers is still a boat. This was the very point made in Heavy Minerals Pty Ltd v Commissioner of Taxation [1966] HCA 60; 115 CLR 512 … which I discuss below. Consequently, the lump sums are not to be seen as having been made to acquire something which was part of the profit-yielding structure. (references to other authorities omitted) Commissioner's contentions based on earlier decision 97 The Commissioner developed some of his contentions by reference to the reasoning by Jagot J in Primary Health Care Limited v Commonwealth of Australia [2016] FCA 313. In that case, the nature of the business conducted by Idameneo arose in a different legal context. The proceedings concerned an application to register the words 'Primary Health Care' and a logo with those words as trade marks. In that context there was a dispute as to the nature of the services in respect of which the registration was sought and the manner in which those services might be described for the purposes of the registration of the trade marks. For Primary, it was contended that it provided services to medical professionals only whereas the respondents contended that the target audience was both medical professionals and patients and others who deal with them. 98 The Court was taken to parts of the reasoning in Primary Health Care to support the claims made by the Commissioner as to the findings that ought to have been made by the primary judge. Senior counsel for Primary objected to such an approach on the basis that findings in those proceedings could not be used as a means of establishing facts in the dispute between Primary and the Commissioner. That is a submission that should be accepted. However, the resort to the reasoning in Primary Health Care was a means by which a submission was advanced to the effect that a similar factual analysis should have been taken by the primary judge. Understood in those terms it was no more than a means of making a submission. We propose to approach it in that way. 99 Reference was made to the following passages from the reasons of Jagot J at [55]-[62]: Nor is it possible to control the scope of the registration by defining the services as services to medical professionals, as the applicant has sought to do … This is because the person paying for the services, the medical professional, is not the only person who receives the services or, at the least, is not the only person concerned with the services. The Services include reception and telephone answering services, patient booking services, patient file management services, information management services, billing and invoicing services, computerised file management, and ordering services, all said to be 'to medical professionals'. Assume then a member of the public who wishes to see a GP who is contracted to and has a practice located in one of the applicant's medical centres (leaving aside, for the moment, the issue about Idameneo and how the marks have in fact been used). The patient calls the centre and speaks to a receptionist. On the applicant's case, in answering the call, the receptionist is providing a service only to the GP the patient might wish to see and not to the patient. This is untenable. The GP who ultimately sees the patient pays for the service but the service cannot be said to be a service to the GP only. It is also a service to the patient, the cost of which is borne by the GP, at least insofar as the GP does not seek to recoup those costs in the consultation fee. Having made the appointment, the receptionist makes a record of it so that the GP can know when the patient is scheduled to arrive. This is a service provided to the GP but, again, it is also a service to the patient. It ensures that a GP is available when the patient arrives. Assume that the receptionist, the day before the appointment, sends the patient a reminder. This is a service to the GP because it avoids late cancellations or patients failing to show up, but it is also a service to the patient reminding them of the time and place of the appointment. When the patient attends the centre, the patient is not greeted by the GP. The patient is greeted by the receptionist. The receptionist may provide a range of services to the GP and to the patient at this point, such as taking the patient's name and address, Medicare and health cover details or letting the patient know when the GP is likely to be ready. When the patient sees the GP the patient then receives clinical care from the GP. After the patient has seen the GP the patient sees the receptionist again to pay the bill. The receptionist prepares the invoice, a service provided to the GP, but also to the patient who wants to receive the invoice. The receptionist takes the payment. In so doing, the receptionist may arrange for the patient to receive a Medicare or health cover rebate or arrange for the patient to assign the rebate to the GP, leaving the patient to pay the gap, if any, out of pocket. Again, these are services to the GP, but are also services to the patient. … Reality dictates that the applicant's attempts to characterise the Services as services provided only to medical professionals cannot be accepted. The attempts reflect a misconception which affects the entirety of the applicant's case. Another misconception in the applicant's case is apparent. It is the notion that the applicant is in the business of providing the Services to health professionals. This is inaccurate. The applicant is in the business of operating medical centres to which it recruits GPs and, as part of a much larger set of activities, it also provides the Services to the health professionals who have contracted to work from such a centre. No health professional can simply purchase the Services from the applicant. As part of the applicant's overall activity, but not otherwise, the applicant provides the Services which of their very nature and in many respects are services to not only the GPs and allied health professionals, but also to members of the public and to others involved in the health system. … …the applicant does not market the Services per se to GPs and allied health professionals. Rather, it markets to GPs and allied health professionals a form of practice from one of its medical centres. The form of practice is to work from a room in one of the applicant's medical centres (GPs are recruited to specific centres and must practice from that centre) which will be fully equipped and supplied by the applicant, with all staff and services necessary for the operation of a medical centre being provided by the applicant in exchange for a fee which is calculated as a percentage of the money earned by the GP from providing clinical services to patients. 100 Although the above analysis exposes aspects of the business conducted by Idameneo that require consideration in the present case, the reasoning is not of any direct assistance for two reasons. First, it appears to rest upon factual material before the Court in Primary Health Care that was not before the primary judge. Second, the present case is not concerned with whether the activities of Idameneo involved the provision of services to members of the public whether directly or incidentally. 101 However, treating the reasoning as a form of submission advanced by the Commissioner in the present case, it is the case that the business of Idameneo involved the provision of staff who dealt with both practitioners and their patients. Whether they did so on behalf of the practitioners who paid Idameneo for the provision of their services or on behalf of Idameneo need not be determined. It is not in dispute that reception services were provided by Idameneo. In our view, it is the other aspects of the arrangements made by Idameneo as part of the transaction which involved the payment of the Lump Sum amounts that assume greater significance for present purposes. That is because the key issue is the identification of what the Lump Sum amounts were paid for, looking at the matter from the perspective of Idameneo at the time the amounts were paid. 102 The approach of the primary judge was to view the business model of Idameneo as being confined to the provision of consulting space and support services, much in the way that the proprietor of a shopping centre rents out space and keeps the premises clean and may promote the centre as a destination for shopping. The proprietor may require each tenant to be open for business during certain hours, but matters end there. Significantly, the structure of Idameneo's business extended well beyond such aspects. The nature of the business conducted by Idameneo 103 Broadly speaking, the findings by the primary judge concerning the nature of the business conducted by Idameneo were correct, as far as they went. Idameneo did not itself provide health care services to the public. That was a matter solely for the practitioners. Idameneo did not charge patients for the provision of those services. The fees were rendered by the practitioners, albeit that Idameneo required bulk billing practices to be adopted and it handled the administrative matters associated with rendering the fees and receiving payments into bank accounts. Further, the practitioners were customers of Idameneo in the sense that it provided services to them for which it charged fees (being the agreed percentage of fees rendered by the practitioner). 104 However, those findings were insufficient to properly characterise the full nature and extent of the business conducted by Idameneo. It failed to bring to account important aspects of the business activities of Idameneo and the means by which it earned profits. On the evidence it operated the Centres. Further, it did not simply operate the Centres as places where it would lease or licence practitioners to use space and where it would deliver administrative and support services to them much in the way that a retail shopping centre may be operated. Idameneo went much further. In substance, it decided every commercial aspect of the manner in which medical services would be provided at the Centres. It set up the way the Centre would look and where particular practitioners would provide services from within the Centres. It made the decisions on what was needed to provide those services and arranged its provision. It controlled when practitioners would work and what they could charge. In every relevant commercial respect save for the medical decisions to be made in providing services, it operated the Centres as places where medical services would be provided to patients of the Centres. It conceived of the manner in which the Centres would operate and introduced the Centres as an innovative and cost effective way in which medical services might be made available to patients. 105 For the Commissioner, it was submitted that Idameneo operated and managed the Centres in a way that included the activities of causing, ensuring and facilitating the provision of medical services to the public. It did so by securing the rights under the arrangements made with the practitioners which tied them to practising in accordance with the Primary model for five years and thereafter restrained them from providing medical services within a specified radius of the Centre. That submission should be accepted. 106 Idameneo's business was concerned with many of the respects in which practitioners provided services to patients at the Centres. Indeed, on the evidence, it was concerned with all aspects other than the actual provision of the medical services themselves, which remained a matter to be determined in the exercise of the professional judgment of the practitioner. However, the business of Idameneo involved the following activities which formed part of the operation by Idameneo of the Centres as places that would attract patients. It was to the considerable commercial advantage of Idameneo to do so because it was paid a percentage of all fees earned by practitioners at each of its Centres. The activities which formed part of the business of Idameneo were: (1) determining the physical configuration of each of the Centres and the layout and fit-out of the premises for the purposes of providing medical services; (2) determining the mix of practitioners who would provide services at each Centre; (3) selecting the practitioners on the basis of criteria concerned with the hours the practitioner was willing to work, what the primary judge described as Dr Bateman's 'rather unsentimental assessment of how effective and efficient the doctor was' and in those cases where the practitioner was moving from a nearby location whether it was plausible to think that patients might come across to the Centre; (4) determining the particular location within the Centre where each practitioner would provide medical services to patients; (5) controlling the provision of all equipment and supplies required by practitioners to provide medical services from the Centres; (6) conducting the reception services provided from each Centre and thereby the direct contact with patients; (7) determining the roster to be worked by practitioners and the hours when the Centre would be open to receive patients; (8) requiring practitioners to bulk bill patients and thereby determining the price of the medical services offered at the Centres; (9) maintaining the patient records for every patient attending the Centre and retaining those records when each Practitioner Contract came to an end; (10) controlling the quality of the medical services that were available from the Centres by selecting suitable practitioners and by retaining the right to terminate the Practitioner Contracts if in the reasonable opinion of Idameneo the practitioner committed an act which if true would, in the opinion of Idameneo, adversely affect the reputation or business of Idameneo conducted from the Centre; and (11) promoting the Centres as places where medical services were available. 107 On the evidence each of these activities was undertaken so as to maximise the profits derived by Idameneo from the provision of medical services by practitioners at the Centre. 108 The activities undertaken by Idameneo went far beyond those that might be engaged in by a business that was no more than a provider of services and facilities to practitioners, including a place to practice. Conclusion as to nature of the business 109 In those circumstances, with due respect to the primary judge, it has been demonstrated that it was not accurate to describe the business of Idameneo as the provision of a comprehensive range of services to general practitioners, specialists and other health care providers who conduct their own practices and businesses at its medical centres. The nature of the arrangements made by Idameneo with the practitioners and the terms in which Primary described in the prospectus the nature of the business of Idameneo was more accurately described as Idameneo operating the Centres. The arrangements show that all material aspects of the conduct of the business of providing medical services to patients at the Centres were in the hands of Idameneo. The practitioners were not employees and they retained the professional responsibility for the care that they provided at the Centres. Otherwise, the nature of the services to be provided at the Centre, by whom and when, the place where that occurred and the fees to be charged were all determined by Idameneo. 110 The nature of the business conducted by Idameneo was not properly described as a service company to practitioners. It was much more than that. The question whether the Lump Sum amounts were paid to secure advantages that formed part of the structure of the business was to be determined on the basis that the business of Idameneo involved operating the Centres as places where medical services could be obtained from medical practitioners so it could earn profits that depended on the number of patients attracted to the Centres by the promotional efforts of Idameneo (including the manner in which the Centre itself was constructed and presented to the public) and the extent to which medical services were actually provided. 111 It may be accepted that the form in which the payments to Idameneo were calculated was not determinative of that conclusion. If the practitioners paid for services based upon a percentage of their own fees but Idameneo had no say in the manner in which the commercial aspects of each medical practice was conducted then it may not have been proper to characterise the business of Idameneo as operating the Centres including by causing, ensuring and facilitating the provision of medical services from the Centres according to a model of practice developed and required by Idameneo to be adopted by all practitioners at its Centres. However, the manner in which it charged for services taken together with the extent of the control that it had (as an essential part of its business model) over the way the Centres were run and the medical services that were available meant that its business was properly described as operating the Centres. Proposition (B): The profit-earning structure of the business of Idameneo 112 The Commissioner contended that Idameneo had paid the Lump Sum amounts to practitioners (a) to secure a commitment to conduct their medical practices from the Centre in the manner provided for in the Sale Deed and Practitioner Contract; (b) to secure the restraint in the restrictive covenants; and (c) to acquire the goodwill of their existing practices. Each of these matters was said to add to the structure and goodwill of the business of Idameneo. The Lump Sum amounts were said to have been made to secure each of those three commitments which were calculated to effect an enduring advantage for the business of Idameneo. 113 For reasons given separately as to Proposition (D), the Lump Sum amounts were not paid to acquire the goodwill of the existing practices. Rather, on the unchallenged factual findings of the primary judge, in some cases the determination of the Lump Sum amount took account of the fact that a practitioner who took on the commitments under the arrangements who had a practice that was close to the relevant Centre would be likely to deliver by established associations with their patients the benefit of attracting a number of those patients to the Centre. This is properly seen as a recognition of the value of the commitments under the arrangements in the particular case rather than an arrangement whereby there was any transfer of goodwill associated with the existing practice to Idameneo. As goodwill forms part of the profit-making structure of any business it is not necessary to consider whether the value to Idameneo of the commitments that formed part of the arrangements with the practitioners might be characterised as goodwill. The issue for determination turns upon the broader question whether those commitments which were secured by the payment of the Lump Sum amounts formed part of the structure of the business. 114 Therefore, Proposition (B) depends upon demonstrating that the nature of the commitments assumed by each practitioner under the terms of the Sale Deed and the Practitioner Contract, including the restrictive covenants, in each case was such that it should be concluded that the Lump Sum amounts were paid to secure arrangements that formed part of the profit-making structure of Idameneo's business. Evidence and findings as to what the Lump Sum amounts were for 115 The evidence that has been recounted shows that Primary developed a new formula for the way medical services might be provided in a cost effective way from one of its Centres at which there were a number of general practitioners and other specialists together with ancillary health services all available from the one place that had been built or renovated by Idameneo for that use. It was said to have been innovative when introduced. It would allow billing practices that left no gap to be paid by the patient and would ensure availability of medical services over extended hours. It would also allow scale efficiencies to be secured in the costs of operating the medical practices of practitioners. It would draw patients to the convenience of a single location. 116 Importantly, the character of the Lump Sum amounts is to be evaluated in circumstances where the arrangements included a mechanism by which Idameneo would be paid according to a percentage of the revenue earned by each practitioner. As already indicated, this meant that its business model did not depend upon simply selling services to the practitioners. Rather, it caused the fortunes of each practitioner and Idameneo to be linked. In short, the more medical services that a practitioner provided at the Centre the more revenue that would be earned and the greater the potential for profit to be earned by Idameneo. This enabled Idameneo to conduct a business from the Centres that sought to attract patients because it had a commercial interest in undertaking activities that increased the flow of patients to the Centres. The reasoning of the primary judge 117 As has been noted, the primary judge concluded that the Lump Sum amounts were paid to earn a five year revenue stream from each practitioner. They were held to be payments made to secure customers as part of the profit-making activities of Idameneo. It was a conclusion that involved accepting Primary's characterisation of the Lump Sum amounts by reference to a number of authorities. It was a conclusion that the Commissioner challenged. The merits of the competing positions first requires a consideration of each of those authorities. BP Australia Ltd v Commissioner of Taxation 118 In BP Australia, BP had entered into solus agreements with service station owners to sell only BP branded petrol during a specified term of years. Under the agreements each owner agreed to brand their site as a BP site for the term of the agreement. BP paid a lump sum to each owner. It claimed the lump sums as allowable deductions. The case went to the Privy Council on appeal from the High Court. It was held that the lump sums were paid on revenue account and were allowable as deductions. 119 At the outset it must be noted that Lord Pearce in delivering the judgment of their Lordships concluded that 'The case is not easy to decide. But on balance of all the relevant considerations the scales appear to incline in favour of the expenditure being revenue and not capital outgoings': at 406. Further, the result was determined by the application of the three principles articulated by Dixon J in Sun Newspapers (quoted above). Therefore, it is an instance of the particular application of established principle to the facts in a particular case where the case was not easy to decide. Subsequent High Court authority in Australia emphasises the importance of the first of those principles as being critical but that was not the manner in which the decision was approached in the Privy Council. Accordingly, the decision in BP Australia provides a weak foundation from which to reason as to the conclusion that should be reached in the very different circumstances that pertain in the present case. 120 Further, in its recent decision in Sharpcan, the High Court reasoned that some of the observations by the Privy Council in BP Australia were 'problematic': at [38]. Their Honours then summarised the main thrust of the reasoning in BP Australia as relying upon the following considerations: (1) that the tying arrangements were not of such duration as to indicate that the ties were a structural solution; (2) that the payments were made to particular customers to secure their particular custom; (3) that the benefit of each payment to BP Australia was to be used in the continuous and recurrent struggle to get orders and sell petrol; (4) that, although not strictly 'bundles of orders', the agreements were the basis of orders and made orders inevitable; and (5) that, for a durable company operating in the wholesale petroleum market after the rapid change from multi-brand franchises to solo-brand sites, the payments were essentially recurrent 121 Then, their Honours said (at [39]): In the result, BP Australia is perhaps best understood as a decision that, where an oil company paid particular customers on a recurrent basis to induce those customers to buy quantities of a product which the oil company sought to sell to those customers on a recurrent basis, the payments were an expense incurred on revenue account in gaining or producing sales and, therefore, deductible. 122 With due respect to the views of the primary judge, the payments made in this case could not be adequately described as payments to gain the practitioners as customers of Idameneo of a kind that was analogous to the circumstances considered in BP Australia. Such a description ignores many of the attributes of the agreed arrangements in the present case which were not present in any respect in BP Australia. 123 In this case, Primary conceived of a business model that involved establishing the Centres to be operated by Idameneo. It conceived of the way those Centres would be operated, the hours during which medical services would be available, the fees that would be paid and the efficient way that the services that would be needed to provide those services could be obtained. It secured the commitment of each of the practitioners to adopt the Primary model and practice from a Centre. It arranged to be paid according to a percentage of the revenue earned rather than an agreed rate for services supplied. By the arrangements that it made, Idameneo did not simply obtain a customer. It secured part of the infrastructure that it needed in order to operate the Centres according to its conception of how medical services should be made available to patients. That infrastructure was both the location at the Centres of medical practitioners and the commitment to adopt the Primary method of practice for a number of years. Unlike the service station owners who, beyond painting their sites in BP livery, could determine for themselves how they sold petrol, the practitioners had commitments that governed in considerable detail how they would conduct their practice (save as to matters concerned with the actual medical judgments to be made in providing services to patients). Further, the prices to be charged by the service station owners in selling petrol was a matter for them. They needed to achieve a target amount of sales in order to be able to keep the lump sum. However, they did not need to adopt a particular method of charging or pay a percentage of their revenues to BP. Finally, unlike BP, Idameneo took on the responsibility for marketing the Centres and attracting patients. 124 Significantly, in BP Australia the analysis of the Privy Council reasoned its conclusion that the payments were made as part of the cost of performing income-earning operations rather than to create, enlarge or acquire the business structure of BP from a finding that the nature of the market meant that oil companies competed for custom by entering into tying arrangements with individual service station operators. Whereas BP secured a commitment for a term of years to the effect that the service station would only buy petrol from BP, it did so in a market where that was the form in which oil companies competed for the custom of service station owners. In such a market, established businesses like BP needed to enter into solus agreements with service station owners in order to secure sales of petrol. In that context, the making of the arrangements with customers was found to be 'one of the current necessities of the trade' whereby petrol was sold by oil companies to service station owners: at 394-398. A conclusion of that kind is not open in the present case. It cannot be said to be necessary in order to be able to supply support services to practitioners that the arrangements of the kind reflected in the Sale Deed and Practitioner Contract must be concluded. Sales of services to practitioners could be achieved without the practitioners assuming all those commitments. 125 Finally, the observations made in the case as to recurrence were made in a context where the payments had already been found to be payments to secure customers. Therefore, they are not of great assistance in the present case. In any event, the reasoning was to the effect that a tying arrangement for a term of five years was neutral 'and in itself indicates neither capital expenditure nor revenue by its mere length': at 400. 126 Therefore, the reasoning in BP Australia is of little assistance in characterising the nature of the payments in the very different circumstances of the present case. National Australia Bank Ltd v Commissioner of Taxation 127 In National Australia Bank Ltd v Commissioner of Taxation (1997) 80 FCR 352 a Full Court of this Court considered the character of a payment made by the Bank to the Commonwealth to secure the exclusive right for 15 years to be the lender under a housing scheme for the Australian Defence Force. The amount was found to have been expended on revenue account. 128 The matter was approached on the basis that the question for the Court concerned what the $42 million payment was calculated to effect from a practical or business point of view, and that the character of the advantage sought by the Bank was the chief, if not the critical issue: at 359. For the Bank it was argued that the lump sum was paid as a form of royalty in respect of the expected overall value of loans to be made under the scheme and its payment as a lump sum was a consequence only of the fact that the Commonwealth wanted to be paid in that manner. There was evidence to support the claim that the quantum of the $42 million payment had been calculated in that manner. For the Bank, the payment was also separately characterised as a form of marketing expense. The Commissioner claimed that the payment was a payment for a form of monopoly over the opportunity to be the lender for the scheme. 129 As to the claim that the payment was a form of royalty expense, the Full Court found as follows (at 365): The payment to the Commonwealth did not enlarge the framework within which the Bank carried on its ordinary activities of borrowing and lending money. It was incurred as part of the process by which the Bank operates to obtain regular returns by means of regular outlay, the difference between the outlay and the returns representing profit or loss. Not only was the payment made as part of the Bank's ordinary trading or income earning activities, it was made in the expectation that the amount would be recouped out of profits made from the loans and other bank products sold to ADF personnel who, it was hoped, would become the Bank's customers. 130 It also upheld the claim that the payment was a form of marketing expense. The Court found some analogy with the reasoning in BP Australia concluding (at 365-366): The payment secured access to a new body of customers, and while the Bank had no monopoly over their business, there was at least the reasonable expectation that because of the subsidy most of them would deal with the Bank rather than with other lenders. Its nature as a commission or marketing expense points to the payment having a revenue rather than a capital aspect. It is true, as the primary judge pointed out, that even advertising expenses can be of a capital nature, as where the expenses are non-recurrent and directed towards the establishment of a market for a new business or new product: Sun Newspapers at 360-361. But the Bank's business is of long standing, and its existing framework well established. Any expense it incurs which is of an advertising, promotional or marketing nature will prima facie be on revenue account. 131 It can be seen that the Court reasoned on both points that the payment did not secure anything that might be added to the framework of the business of the Bank that was necessary for it to be able to lend money to customers as part of the scheme. Rather, the payment was made as part of the trading activities of the Bank. The same cannot be said of the Lump Sum amounts in the present case. It was not enough for Idameneo to build the Centres and offer services in order for it to establish the business of operating the Centres. It also needed to secure arrangements with medical practitioners by which they would commit to the Primary model. It needed all of the detailed commitments as to matters covered in the Sale Deed and the Practitioner Contract. Without those commitments it had no business. Further, it could not be said that the amount of the Lump Sum was referable directly to the cost of securing the opportunity to make individual sales of services to the medical practitioners. Nor, was it a payment that was needed in order to secure their custom. Rather, the amount of the Lump Sum was determined by reference to a general assessment of the amount of revenue that might be earned by deploying the commitments of the particular medical practitioner to adopt the Primary mode of practice at one of its Centres for the duration of the arrangement. That form of assessment is consistent with the Lump Sum amounts being on capital account because they secured a commitment for a term of five years to act in a manner that could be deployed by Idameneo to operate its Centres at a profit. Tyco Australia Pty Ltd v Commissioner of Taxation 132 In Tyco Australia Pty Ltd v Commissioner of Taxation [2007] FCA 1055, Allsop J (as the Chief Justice then was) considered the nature of payments made by Tyco to secure assignments of three year customer service agreements procured by its authorised dealers. The agreements concerned residential security monitoring systems. The Commissioner disallowed deductions for the payments. The appeal by Tyco was successful. 133 His Honour dealt with the legal principles beginning with Sun Newspapers. His Honour emphasised that the task was not simply about identifying the correct description of the legal rights. Rather the necessary inquiry 'looks to the business and practical effects and advantages sought in the whole context': at [47]. 134 In Tyco there were a number of instances where the assignment fee was equal to the whole of the revenue that might be earned in providing the services in the first two years and about two-thirds of the fee payable in the third year. In that context, the question was whether the fee was on capital account and his Honour said (at [78]): The fact that the Assignment Fee was, under the first two versions of the authorised Dealer Agreement, almost the whole of the contracted revenue stream, and, under the third, about two thirds of it, may say something about the initial commercial wisdom of the setting of the Assignment Fee, but it does not persuade me that the payments were on capital account. It highlights that the advantage sought was the winning of the individual customer and the hoped-for future revenue after the initial three year period which might be brought about once the connection was made. Looked at in this way, the expenditure of money was in the ordinary business activity of winning customers. It is an illustration, perhaps, of the fineness of the judgment that needs to be made (the 'basal difficulty' as Dixon J called it in Sun Newspapers…) in characterising the method used to increase the extent, condition or efficiency of the profit-yielding subject when that can be seen to be effected by the course of operations. This is especially so in a business whose structure and value is based on the attachment and goodwill of customers for the provision of services or the supply of goods. 135 The arrangements were held to be a business method by which Tyco sought to contract and profit from additional customers: at [79]. It can be seen that the payment was directly referable to securing the customer. It was a strategy of expending monies referable to individual customers in order to secure their ongoing business: at [83]. 136 Here, for reasons already given, the payments made did not simply secure the opportunity for Idameneo to be able to supply services to the medical practitioners for the term of the agreements. Under the arrangements made, Idameneo secured much more than the custom of the practitioners. Any resolution of the question whether the Lump Sums were paid for the opportunity to secure their custom must take account of the significance of the other commitments secured by the arrangements. Treatment of the authorities by the primary judge 137 The primary judge viewed the significance of the above authorities for the present case in different terms to that set out above. In doing so, his Honour's approach was substantially influenced by his view about the nature of the business of Idameneo, particularly the view that the business was confined to providing services to the medical practitioners. For reasons given as to Proposition (A), error has been demonstrated in that approach. When account is taken of the significance of the arrangements made with the practitioners for the operation of the Centres then each of the above authorities may be distinguished from the present case. In our view, principally for that reason, the Commissioner has demonstrated error in the treatment of those authorities. Recurrence 138 It was submitted for Primary that the Lump Sum amounts were recurrent and that was a matter that supported their characterisation as being on revenue account. They were said to have been made 'regularly and repeatedly'. The primary judge placed significance on the fact that there were 505 Lump Sum amounts paid during the relevant period of five years. This was characterised as Idameneo 'constantly making the payments to satisfy its need to enlist more doctors': at [88]. His Honour described Idameneo as needing to rapidly engage sufficient doctors to staff its medical centres, but that the facts show that 'Idameneo was permanently engaged in a perpetual process of engaging doctors for whom it appears to have had an unquenchable thirst': at [80]. Idameneo was said to have 'an ongoing demand for them': at [55]. 139 As can be seen, these findings by his Honour recognise that Idameneo needed practitioners for its business. However, the terms in which they are expressed do not characterise the conduct of Idameneo as simply seeking to find more medical practitioners as the customers for the services it provided to them at its Centres. Rather, they reflect the fact that it needed to enlist the practitioners in the Primary way of doing things and in that sense it had a demand for them. For reasons that have been given this was the proper way to view the arrangements. Idameneo needed the practitioners in order to be able to operate its business. 140 Ensuring the availability day to day of the services of practitioners at its Centres, making those services available in the manner conceived of by Primary, was essential to Idameneo's business activities. However, Idameneo did not simply go out and seek to 'staff' its Centres with doctors. It could not do so. It was not able to conduct the Centres in that way because it could not itself provide medical services. Rather, what it needed was doctors who would conduct their practices from the Centres according to the Primary model. In order to conduct the day to day activity of operating the Centres so as to attract patients and earn revenue based upon a percentage of the fees paid to the practitioners by those patients, it needed practitioners who were committed to adopting the Primary way of doing things. As the primary judge said it needed to create, in effect, a hive of doctors: at [32]. Just as much as the Centres needed the physical capital assets comprised by the bricks and mortar of the buildings, they also needed the capital asset of practitioner commitments to be at the Centre for five years (and thereafter subject themselves to the restraint). Then, Primary could confidently operate the Centre safe in the knowledge that it had the practitioners that those attending the Centres would need in order to be able to secure medical services at bulk billed or no gap fees on any day of the year, with or without making an appointment. 141 The fact that Idameneo needed a lot of practitioners for its quickly growing network of Centres and it also needed to replace or renew their commitments at the end of each five year arrangement accounted for the significant number of Lump Sum amounts. However, it did not lead to the conclusion that the Lump Sum amounts were recurrent payments made in the course of the process of Idameneo securing customers as part of operating its business. After all, it did not itself need the practitioners so it could provide medical services to patients. Nor did it need practitioners who were willing to move to the Centre but wanted to control the arrangements about fees to be charged, hours to be worked and equipment that might be used. What it needed was practitioners who would give up that independence and join the hive. The hive had to be set up and replenished, but the hive itself formed part of the structure deployed by Idameneo to earn profits. It was not the establishment of staff needed to operate the business. It was the gathering of the ongoing commitments needed to be able to operate the Centres. Recurrence in expenditure to secure those commitments was not expenditure on revenue account. It was expenditure of the same character as that incurred to build the Centre. It was expenditure to establish the profit-earning structure for Idameneo's business of operating the Centres. Over time, the structure would need to be replenished. But the expenditure on replenishment was not properly characterised as the recurrent cost of securing a customer. Nor was it properly viewed as the cost of staff. Therefore, viewed in context, it was not a recurrent cost of operating the Centres. Enduring nature 142 Reliance was also placed upon a contention that the arrangements were not enduring in nature. If the arrangements ran their course, then each practitioner was committed to conduct a medical practice from one of the Centres for five years and thereafter not to provide medical services to patients within the area of the restraint for a further three years. 143 As noted in BP Australia a term of five years is neutral as to characterising the payment. It is a length of term that might be associated with either expenditure in the operation of the business or expenditure in securing the structure of the business. The cases are replete with reminders that particular characteristics are not decisive. Many payments on capital account have a life that might be measured in five to eight years. Take, for example, the purchase of a vehicle or an item of equipment that is required to conduct a business. The critical issue is whether the payment was made to add to the profit-making structure of the business of Idameneo. What is needed is a consideration of all the circumstances of the case from a practical and business point of view to identify the character of the advantage that the contentious payment sought to secure. 144 Further, by requiring the practitioner to practise only from the Centre and then to be restricted by the restraint, the arrangements ensured that associations that patients would develop with the Centre as a place to obtain all their medical services (being part of the model operated by Idameneo) during the period a practitioner was at the Centre were not threatened when a practitioner departed. The Lump Sum amounts were paid to achieve that lasting protection for the goodwill of the Centre. They did have an enduring character, at least to that extent. Conclusion as to what the Lump Sum amounts were paid for 145 In order to commence a business of a kind contemplated by Idameneo to be conducted from each Centre, Idameneo needed the physical infrastructure of the Centre (its building and fit-out), but it also needed commitments from the practitioners of the kind provided for in the Sale Deed and the Practitioner Contract. Until it had those commitments it could not begin to conduct the business. It could not open the Centre and commence operating. That was because it was essential to Idameneo's business that it had secured commitments from a group of practitioners of the requisite mix (and providers of ancillary services) that would enable it to operate a Centre of the kind described in Primary's prospectus. Its business model required commitments from practitioners to enable it to operate every day of the year, to have rosters that enable there to be practitioners at the Centre every day and to ensure that patients were either bulk billed or, in the case of private patients, there was no gap. It needed a number of practitioners to be able to reduce the costs of providing the services needed for them to conduct their practices and thereby enable it to earn profits from the revenue that it derived from operating the Centre and providing services to the practitioners. 146 But the significant point is that it needed all those commitments before it started operating the Centre. Even without a single patient it needed those commitments. Only then could it begin operating the Centre. 147 Therefore, when Idameneo paid the Lump Sums to secure the relevant commitments it was not, like BP, paying for future custom. BP was already set up to provide petrol when it entered into the solus agreements. It did not need to have a single solus agreement in order to start selling petrol. Those agreements were not part of the necessary infrastructure of its business. However, by reason of the practices adopted by its competitors in order to secure sales it too had to offer solus agreements with upfront lump sums in order to sell petrol to service station owners. It did not need the contracts as part of its profit-making structure. It needed to enter into the contracts in the course of operating its business so as to be able to make sales. 148 Likewise, the Bank in National Australia Bank did not need to secure the contract with the Commonwealth in order to be in business. It had the resources and financing facilities to be able to provide the loans. However, the upfront payment was needed in order to secure a bundle of loan contracts as part of operating that business. 149 Equally, Tyco did not need the assignment of the individual agreements that had been made by its authorised dealers in order to be in the business of providing security monitoring services. Each assignment was an incremental increase in its sales that carried the potential for the sale of ongoing services. The agreements were not part of the infrastructure of the business. They were the result of sales activity to secure contracts. 150 It can be seen that the Lump Sum payments in the present case were of a fundamentally different character to those made in the cases relied upon by Primary. They secured ongoing commitments for five years of a kind that were necessary in order to be able to set up each Centre and conduct a business of the kind that was operated by Idameneo from each Centre. Further, as time went on Idameneo needed to replace the commitments from a departing practitioner with those with an ongoing commitment from a new practitioner, or to expand the business by adding additional practitioners. Each time it did so and made a payment of a further Lump Sum amount it was maintaining the structure of its business. It was ensuring it had in place the commitments that it needed to operate its business irrespective of whether there was one patient coming to the Centre or many thousands. 151 Of course, the fact that the practitioners agreed to conduct their practice from the Centre and pay Idameneo for the services was also the means by which Idameneo secured ongoing revenue and made a profit. Each provision of medical services by each practitioner produced revenue for Idameneo. However, that was not because of any further activity by Idameneo to sell those services to the practitioner. All it needed to do was to implement the arrangements and attract patients to the Centre. If the arrangements secured by the Lump Sum amounts had not been in place then the extent to which practitioners needed services would depend entirely upon the efforts of each practitioner to attract patients to the Centre, not upon the efforts of Idameneo and the Primary business model. In that event, irrespective of whether payment to Idameneo for the supply of services might have been secured by payment at an agreed rate or according to a percentage of fees rendered, Idameneo would need to deal with the practitioners about the nature of the services required and take steps to effect the sale of services. It might be expected to be interested in supplying services to practitioners at other locations. But under the arrangements no such activity was required on the part of Idameneo. It decided the nature of the services that were to be available at its Centres and the manner in which they would be provided. Those arrangements enabled Idameneo, in effect, to run the practices of the practitioners at Idameneo's cost and in return to receive the agreed percentage of the fees earned. Its business activity was not focussed upon selling services to practitioners, it was focussed upon running the Centres and attracting patients. In this regard the evidence about discussion in board meetings of Primary of the patient numbers and its regular release of that information to the investment market is significant. Once the structure was in place, the business did not depend upon securing sales of services to practitioners. It depended upon whether medical centres with the characteristics conceived and implemented by Primary were effective in attracting patients. 152 If all that Idameneo had done was to set up the Centres and then secured practitioners as customers to occupy the Centres and pay for services then term contracts with upfront lump sum payments might indeed be seen to be analogous to those made in BP Australia, National Australia Bank and Tyco. But, on the evidence, the Lump Sum amounts were not paid to secure the custom of the practitioners. There was no provision of the arrangements whereby the Lump Sum amounts had to be repaid if a level of revenue was not generated by the practitioner (such as there was in the case of BP Australia). There was no assurance that each practitioner would pay a minimum amount in fees for services (such as there was in Tyco where the first three years of fees for monitoring were required to be paid by the customer under the assigned contracts). There was no detailed calculation of the level of services that might be required by each practitioner (such as there was in National Australia Bank). 153 Rather, the payments that were made to each of the practitioners to give up conducting their practice in the manner they chose and adopt the requirements necessary for Idameneo to conduct each Centre. They were made for taking on obligations of the kind set out in the Sale Deed and the Practitioner Contract for a period of five years. Those obligations pertained irrespective of the level of services that might be required by the practitioner and irrespective of the level of fees charged by the practitioner to patients (and hence fees to Idameneo) over the course of the arrangement. 154 The Lump Sum amounts were paid for the commitments by each of the practitioners for a term of five years to conduct their practice from the nominated Centre in a manner that conformed to the Primary mode of practice. Each of those commitments enabled Idameneo to be able to operate the Centre. Without those commitments it did not have the infrastructure that it needed to conduct the business of operating the Centres in the manner that conformed to its business model or to continue and expand that business. The fact that the Lump Sum amounts were paid for commitments of that character and for such a purpose is evident from the descriptions in the prospectus document and the evidence of Mr Duff. 155 As the primary judge recognised, a business structure without customers is just as much a business structure: at [57]. The effect of the above analysis is to demonstrate how the arrangements made by Idameneo for which it paid the Lump Sum amounts were payments for commitments that were required before the business could start. The present instance is complicated to some extent by the fact that the practitioners' commitments are both the means by which the necessary structure is secured and the mechanism by which sales of services to those practitioners will be secured. The significant point here is that the Lump Sums are paid for the commitments necessary to begin operating the Centre. The subsequent flow of revenue to Idameneo is a function of how successful the Centre is in attracting patients, not any level of intrinsic demand of practitioners for services that is assured by the terms of the arrangements. 156 The above analysis reflects the approach considered in Heavy Minerals Pty Ltd v Federal Commissioner of Taxation (1966) 115 CLR 512, a point recognised by the primary judge: at [77]. In Heavy Minerals large payments were made to discharge obligations under long terms contracts for the supply of rutile in circumstances where the contracts were no longer profitable due to a fall in the price of rutile. It was reasoned that the capital assets needed to conduct the mining of the rutile still existed after the payments were received to cancel the contracts and therefore the contracts were not capital assets. The primary judge relied in particular upon the observation of Windeyer J in Heavy Minerals at 517 that even if the contracts seemed to ensure a secure market and some regular customers, that would not of itself make them part of the capital of the business. The primary judge viewed the arrangements with practitioners in this case as being analogous to the circumstances in Heavy Minerals. However, for reasons that have been given, if in this case the arrangements were not made with the practitioners, Idameneo could not conduct its business of operating the Centres. Therefore, application of the reasoning in Heavy Metals to the present case leads to the result contended for by the Commissioner. 157 Further, there was no contention that only part of the Lump Sum might be on capital account and part on revenue account. The parties were joined on whether the Lump Sum amounts were of one kind or the other. The position of Primary (as accepted by the primary judge) was that the whole of each Lump Sum amount was paid to secure a customer, namely the individual practitioner. 158 Finally, it is necessary to consider the significance for the above analysis, if any, of the nature of the restrictive covenants accepted by practitioners under the arrangements with Idameneo. They had two aspects. First, the practitioner must only supply medical services from the Centre during the term of the arrangement. This is a restraint which requires exclusivity during the term of the arrangement. Second, the practitioner must not practise within a specified geographical radius of the Centre for three years after the termination of the arrangement. This is a restraint of trade. 159 As to the exclusivity restraint, the primary judge found it to be the other side of the coin to the obligation to provide services from the Centre for the agreed term. On that basis he found the restraint to be ancillary or subordinate: at [69]. It is to be noted that such a conclusion flows from his Honour's characterisation of the arrangements with the practitioner as being for 'the principal purpose [of] securing the doctors' presence at the medical centre where fees could be won from them': at [69]. For reasons given above, such a description did not adequately characterise the nature of the arrangement or its evident purpose. If the significance of the nature of the commitments for the operation of the Centres is brought to account, then the exclusivity arrangement is the other side of the coin for those affirmative commitments. They ensure that those commitments remain in place for the term of years as agreed. It is the other side of the coin of those arrangements. For reasons already given those arrangements secured an essential part of the profit-making structure of the business conducted by Idameneo from each of the Centres. Therefore, the restraint protected part of the business structure. 160 Of further significance is the fact that the restraint does not concern a commitment to acquire services only from the Centre. Rather, it is a commitment not to supply medical services at any place within a specified radius of the Centre during the term of the agreement. Its focus is upon protecting the business of operating the Centre. Its terms reflect the nature of the commitments as already described. 161 Reference was made to the fact that the Sale Deed provided for a proportionate refund of the Lump Sum in the event that the deed was terminated for breach by the practitioner. As has been noted the breaches that might lead to termination were focussed upon matters concerned with the medical practice of the practitioner, not with whether the practitioner was performing an obligation to acquire services from Idameneo. In particular, it was a relevant breach if in the reasonably held opinion of Idameneo the practitioner had committed an act which, if true, would in the opinion of Idameneo 'adversely affect the reputation or business of [Idameneo] conducted from the [Centre]'. It was also a relevant breach if the practitioner was 'guilty of any wilful neglect or misconduct'. Therefore, the refund would be consequent upon events that prevented the practitioner from fulfilling the commitments that formed part of the profit-earning structure of Idameneo's business. Significantly, the terms of the Sale Deed govern the nature and extent of the obligation of the practitioner to practice from the Centre and set out the commitments as to the hours that will be worked to enable the Centre to operate 24 hours a day for 365 days a year. As to the supply of services, the obligation in the Sale Deed (which provides for the payment of the Lump Sum) is only to enter into the Practitioner Contract. Therefore, the existence of the refund is consistent with the fact that the value to the structure of the business is what is being refunded by the practitioner, not the loss of the practitioner as a customer who might buy services. 162 As to the geographical restraint that extends beyond termination, again it is a restraint on the provision of medical services. It is not a restraint on obtaining practice support services from any third party. It operates as a protection for the Centre and the business of Idameneo in operating the Centre. Therefore, it is a valuable protection for the structure and goodwill of the business. It ensures that a practitioner cannot supply medical services from another place within proximity to the Centre. The evident purpose of such a restriction is to protect the Centre from the loss of patients to a practitioner setting up nearby. To the extent that the Lump Sum was paid to secure the geographical restraint it protected the business of Idameneo in operating the relevant Centre. Therefore, it too is consistent with the above analysis. 163 It follows that error has been demonstrated in the conclusion by the primary judge that the Lump Sum amounts were paid to secure the practitioners as customers and Proposition (B) has been established sufficiently to support success for the Commissioner on the appeal. Nevertheless, to the extent that a separate and distinct complaint was raised concerning the reasoning of the primary judge as to the significance of the restrictive covenants that is addressed below in dealing with Proposition (C). Proposition (C): The restrictive covenants 164 As to the restrictive covenants, as has been noted, the primary judge found that the restraints (both the exclusivity restraint and the ongoing geographical restraint) were ancillary or subordinate to the principal object of securing the custom of the practitioners. They were both said to be the 'other side of the coin' to the obligation to acquire services from Idameneo under the agreed terms. Therefore, despite the authorities concerned with instances where payments had been found to be on capital account because they protected the structure of a business, the primary judge found that Lump Sum payments were made to obtain the benefit of having as many doctors as possible: at [69]. With respect, there are two difficulties with this reasoning. 165 First, the fact that practitioners agreed to the geographical restraint was not the other side of the coin of the affirmative obligation expressed in the Practitioner Contract to acquire services from Idameneo and to pay for those services the agreed percentage of fees rendered by the practitioner. The geographical restraint operated after that obligation came to an end. 166 Second, as to both restraints, they could not be viewed separately from the arrangement as a whole. The adoption of a practical and business perspective did not allow the nature of the commitments to be compartmentalised. The advantage that was sought to be secured by Idameneo in making the payments was to be evaluated by considering the whole of the arrangement. Once that perspective is informed by a proper understanding of the nature of the business of Idameneo in the manner explained in dealing with Proposition (A) then for reason already given it is evidence that the Lump Sum payments were made on capital account. Proposition (D): Idameneo's accounting treatment of the Lump Sum amounts 167 It was common ground that Idameneo included all of the Lump Sum amounts as goodwill in its accounts. The Commissioner contended that the accounting treatment was a fact that supported the claim that the Lump Sum amounts were received on capital account. 168 The primary judge found that the accounting treatment was a result of the requirements of the applicable accounting standards and not any particular perception by Idameneo about the nature of the arrangements: at [47]. In reaching that conclusion, his Honour relied upon the evidence of Mr Duff. 169 Mr Duff's affidavit evidence on the point began with the consideration of a research report prepared by a market analyst concerning the costs being incurred by Primary as at March 2003 in expanding its business. He expressed agreement with the following statement in the report: As patient growth is almost a direct function of new GPs contracted, investors should expect significant goodwill outlays to lock in the engine behind the growth of the business model. 170 Mr Duff then said that the goodwill outlays were the Lump Sum amounts and at that time 'for accounting purposes Primary recorded these outlays as the acquisition of goodwill, a long-term asset'. He then said: I thought that the lump sums were for the acquisition of goodwill (in an accounting sense) and any other item listed in the relevant schedule. I also thought, at the same time, that the commercial purpose of the payment was as I describe in paragraphs 81 and 82 above. Primary's accounting treatment of the lump sums paid to Health Practitioners as a capital payment for 'goodwill' was consistent with the Australian Accounting Standards Board ('AASB') standards AASB 1013 and later AASB 3. Under AASB 1013 (which applied from at least 1 July 2002 to 30 June 2005), purchased goodwill was recognised as a non-current asset and amortised over 20 years as an expense in the profit and loss account. Under AASB 3 (which applied from 1 July 2005), goodwill could not be amortised but instead was assessed for impairment annually. Primary adopted this accounting treatment for the lump sum amounts during the Relevant Period. 171 The reference to the earlier description is to the quotation from the analyst's report and the following statement: As CFO, I approved the practice of Primary making lump sum payments … because the contract under which the payment was made committed the Health Practitioner to provide their services from the Primary medical centre for the period of the contract, and for the specific hours contracted, and accordingly Primary would earn fees referable to those services. Ensuring a Health Practitioner complied with the terms of his or her contractual arrangement (in particular, the periods of service and the working hours) was key to the financial success of the Primary business model. 172 In effect, Mr Duff's evidence was that the accounting treatment was only to reflect the accounting standards and the reason he made the payment was to both obtain and ensure compliance with the commitments under the arrangement. In effect, the primary judge accepted this evidence. 173 For reasons already given, those commitments formed part of the profit-making structure of the business. Therefore, the payments were made on capital account irrespective of the evidence about accounting treatment. For that reason, it is not necessary to decide the ground raised by Proposition (D). However, as the ground concerns an allegation of factual error and the matter having been argued, we will deal briefly with the ground. 174 For the Commissioner, reliance was placed upon an answer given by Mr Duff in cross-examination and a consideration of the terms of the relevant accounts. As to the evidence of Mr Duff, he was asked why he formed the view that the accounting standard applied to the Lump Sum amounts. He responded: 'because the overriding consideration is that a business has been acquired and the assets and liabilities of that business'. Mr Duff also agreed that during directors' meetings of Primary, the directors talked in terms of acquiring the goodwill of the practices. 175 As to the accounts, for the 2003, 2004 and 2005 financial years they included notes to the effect that during the year an identified number of medical practices 'were acquired' and the consideration paid was recorded as 'Goodwill on acquisition'. Then in 2006 a system which required the accounts to record any 'impairment' to goodwill was introduced. Those accounts continued to carry the accumulated goodwill. Under the noted to the accounts under the heading 'Impairment tests for goodwill', the 2006 accounts said: Goodwill is allocated to the Group's cash generating units (CGUs) identified according to business segment…The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections over 20 years based on financial budgets and forecasts approved by management. Cash flows are extrapolated beyond the budget period using an estimated growth rate of 1% which does not exceed the long-term average growth rate for the business in which the CGU operates. A discount factor of 9.50% (2005: 10.06%) was applied to the value in use model. The carrying value of Goodwill is currently equal to cost. No impairment losses have been booked to date. 176 The accounts also include financial detail of what was described as 'practice acquisitions'. 177 Therefore, the evidence indicates a view that the Lump Sum amounts were required to be included in the accounts as goodwill because they were payments made to acquire the business of practitioners. However, as the primary judge correctly found, Idameneo could not acquire a medical practice. Further, the arrangements made between Idameneo and the practitioners did not result in Idameneo conducting the former medical practices of those practitioners. Therefore, even though the directors might have referred to the arrangements as 'acquisitions' of existing medical practices, they were not. The arrangements were certainly the means by which the practitioner was acquired as a customer of Idameneo. For reasons that have already been given, they were also the means by which Idameneo acquired the commitment of the practitioner to adopt all the commercial aspects of the Primary model of medical practice. Acquiring those commitments was an essential aspect of conducting Primary's business of operating the Centres. But they were not simple acquisitions of an existing business. 178 Faced with those matters, it was submitted for the Commissioner that in relation to the 'geographical goodwill' of the practitioners, Idameneo did not acquire that goodwill. Rather, it made use of the goodwill or it acquired it and ensured that it effectively came to an end. Further, the way in which the agreements operated meant that the personal goodwill of the practitioner could only be exploited at the Centre and, in that sense it was 'captured' by Idameneo. However, for reasons already given, that was not the character of the arrangements nor was it what was sought to be achieved by them. Rather, they were directed at establishing the structure needed for Idameneo's business. In many instances, practitioners had to be enticed away from an existing practice and no doubt they were attracted to do so by the Lump Sum amounts. But they were not being paid to close down their practices. From the perspective of Idameneo, they were being paid to conduct their practice from one of its Centres according to the model developed and operated by Idameneo. 179 In our view, the Commissioner has not demonstrated error in the primary judge's finding to the effect that the way in which the Idameneo dealt with the Lump Sum amounts in its accounts reflected its view of how the accounting standards applied to those payments. The accounting treatment did not support a factual conclusion that those responsible from Idameneo's perspective for entering into the arrangements sought to acquire the existing goodwill of the individual practices. The evidence as a whole leads to the conclusion that there was no such acquisition. Reasons for allowing amendments to the notice of appeal 180 At the hearing of the appeal, certain amendments to the appeal grounds were allowed over the opposition of Primary. At that time it was indicated that reasons would be provided for allowing the amendments. The following are our reasons for doing so. 181 The amendments clarified the grounds in respects that conformed to the submissions that had been filed. It was submitted for Primary that certain of the amended grounds departed from the manner in which the case had been run before the primary judge. 182 There were two aspects of the then proposed amendments that were objected to by Idameneo. First, the addition of ground 6(c) which added a claim that the primary judge ought to have found that from a practical and business perspective the advantages which the arrangements secured included 'from a practical perspective, the acquisition of the existing practices of the medical practitioners, including the goodwill of those practices'. This was objected to on the basis that the Commissioner had claimed before the primary judge that the Lump Sum amounts had been paid to acquire the goodwill of the practitioner's existing practice and there had been no fall back case that the goodwill had been acquired in a practical sense or from a practical perspective. It was said that if the case had been put in those terms then particulars would have been sought because the precise nature of such a claim was not comprehended by Idameneo. 183 Second, the addition of ground 10A was opposed. It claimed that the primary judge erred in rejecting Idameneo's accounting treatment of the Lump Sum amounts as evidence of what from a practical and business point of view was sought to be achieved by the payments. This was said to go beyond the use to which the evidence was sought to be put before the primary judge. It was said that before his Honour the Commissioner had sought to rely on the accounting treatment as evidence of what Idameneo thought it had achieved rather than evidence of what Idameneo sought to achieve by paying the Lump Sum amounts. 184 As to the first objection, there was no dispute that the issue before the primary judge concerned whether the Lump Sum amounts formed part of the structure of the business and that was a matter to be evaluated by reference to the terms agreed in the Sale Deed and the Practitioner Contract which were canonical examples, the evidence of Mr Duff and the documents. As a matter of law, that question could not be decided without considering matters from a practical and business perspective. A dispute between the parties as to whether the Lump Sum amounts were paid for the goodwill of the practice must embrace whether that was their practical and business effect even if, as a matter of law, there could be no transfer of any such goodwill. 185 As to the second objection, the issue in contention was whether the case below relied upon the accounting treatment as evidence of the advantage that Idameneo sought to achieve from the transaction. Again, that was the relevant issue, not any question as to what Idameneo thought it had achieved. It is the case that the primary judge summarised the submission for the Commissioner as being that the accounting treatment 'was relevant to what Idameneo thought the nature of the transactions was which was pertinent when the time came to assess the nature of the lump sum payments from a practical and commercial perspective': at [47]. However, given the nature of the overall issue between the parties the possible significance of the accounting evidence was whether it supported the conclusion that the advantage that Idameneo sought to obtain was an addition to the structure of its business. It did not matter what Idameneo might have thought after the event. Nor was this a case where there was a single transaction followed by some later evaluation by Idameneo as to its character when accounting for the transaction. This is a case where 505 transactions of the same character were entered into over five years. 186 In our view the distinctions that were sought to be drawn were semantic in character. They sought to articulate limits on the nature of the case below that were not evident in the broad terms in which the issues were joined before the primary judge. As Idameneo stated in its appeal statement before the primary judge, the central question was whether the Lump Sum amounts were capital in nature. It was not demonstrated that there was any particular material from which it might be concluded that the parties were joined as to that question with the qualifications or limitations raised in opposition to the proposed amended appeal grounds that were articulated for Idameneo in the appeal. For those reasons, we joined in allowing the amendments. 187 We note that, in any event, in the view that we have taken, neither point has assumed significance for the conclusion that we have reached that the appeal should be allowed. Orders and costs 188 For those reasons, the appeal by the Commissioner should be allowed and the decision of the primary judge set aside. In lieu thereof the application by Primary to appeal from the Commissioner's objection decision should be dismissed with costs to be assessed if not agreed. Primary should also pay the costs of the appeal to be assessed if not agreed. I certify that the preceding one hundred and eighty-eight (188) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Jagot, Moshinsky and Colvin. Associate: Dated: 9 October 2020