Merchant v Commissioner of Taxation [1999] FCA 49

FEDERAL COURT OF AUSTRALIA Merchant v Commissioner of Taxation [1999] FCA 49 TAXATION – income tax – allowable deductions – afforestation scheme – taxpayer entered into lease and management agreement of pine plantation for 30 year period – alleged pre‑payment of four years lease payments – whether lease and management charges actually paid – whether conclusion of agreement alone established "sufficient connection" – whether outgoings to revenue account – whether apportionment of management fee appropriate – whether apportionment of outgoings to portion "properly referable" to relevant year appropriate. TAXATION – income tax – outgoings – afforestation scheme - taxpayer entering into loan agreement – whether loan funds advanced – whether interest "incurred" – whether conclusion alone of agreement establishes "sufficient connection" – whether presently existing liability – whether funds used for connected purpose – whether interest should be apportioned to that portion "properly referable" to relevant year.

WORDS & PHRASES – "properly referable", "incurred", "sufficient connection"

Income Tax Assessment Act 1936 (Cth) s51(1) Federal Commissioner of Taxation v Lau (1984) 6 FCR 202, distinguished Federal Commissioner of Taxation v Emmakell Pty Ltd (1990) 90 ATC 4319, distinguished Brand v Federal Commissioner of Taxation (1995) 95 ATC 4633, distinguished Coles Myer Finance Ltd v Federal Commissioner of Taxation (1993) 176 CLR 640, applied Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47, cited Charles Moore & Co (WA) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344, cited Calkin v Commissioner of Inland Revenue (1984) 7 TRNZ 100, cited Woolcombers (WA) Pty Ltd v Federal Commissioner of Taxation (1993) 47 FCR 561, referred to Federal Commissioner of Taxation v James Flood Pty Ltd (1951) 88 CLR 494, applied Ogilvy and Mather Pty Ltd v Federal Commissioner of Taxation [1990] ATC 4836, referred to Nilsen Development Laboratories Pty Ltd v Commissioner of Taxation (1981) 144 CLR 616, cited Cliffs International Inc v Commissioner of Taxation (1979) 142 CLR 140, distinguished McLennan v Commissioner of Taxation (1989) 91 ALR 52, distinguished