Macquarie Finance Limited v Commissioner of Taxation [2004] FCA 1170

FEDERAL COURT OF AUSTRALIA

Macquarie Finance Limited v Commissioner of Taxation [2004] FCA 1170 INCOME TAX – deductions – whether amount of "interest" payable by applicant in respect of stapled income securities being a preference share issued by parent bank and a beneficial interest in a note issued by the applicant deductible – distinction between outgoings on capital account and outgoings on revenue account – whether paid to secure an advantage of an enduring kind. INCOME TAX – deduction – convertible notes – whether "interest" not deductible under s 82R(3) of the Income Tax Assessment Act 1936 - whether notes issued by applicants were convertible notes as defined. INCOME TAX - tax avoidance – whether deduction of "interest" paid by applicant a tax benefit – whether issue of income securities together with an agreement that principal and interest on notes would become payable to parent bank or the giving of a notice constituted a scheme to which the provisions of Part IVA of the Income Tax Assessment Act 1936 applied – conclusion as to dominant purpose of persons entering into or carrying out scheme having regard to the factors in s 177D(b) – whether to obtain deduction for interest.

Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Texas Co (Australasia) Ltd v Federal Commissioner of Taxation (1940) 63 CLR 382 cited Steele v Deputy Commissioner of Taxation (1999) 197 CLR 459 cited Federal Commissioner of Taxation v South Australian Battery Makers (1978) 140 CLR 645 referred to Europa Oil (NZ) Ltd v Commissioner of Inland Revenue (NZ) (No 2) (1976) 76 ATC 6001 referred to Federal Commissioner of Taxation v Broken Hill Pty Ltd (2000) 179 ALR 593 cited Federal Commissioner of Taxation v Century Yuasa Batteries Pty Ltd (1998) 82 FCR 288 cited Re Farm Security Act 1944 of the Province of Saskatchewan [1947] SCR 394 cited Federal Commissioner of Taxation v Firth (2002) 120 FCR 450 cited Lomax (Inspector of Taxes) v Peter Dixon & Co Ltd [1943] 2 All ER 255 cited Jewel Tea Co Inc v United States (1937) 90 F 2d 451 referred to Emu Bay Railway Co Ltd v Federal Commissioner of Taxation (1944) 71 CLR 596 referred to Ronpibon Tin NL & Tong Kah Compound NL v Federal Commissioner of Taxation (1949) 78 CLR 47 cited W Nevill & Co v Federal Commissioner of Taxation (1937) 56 CLR 290 cited Federal Commissioner of Taxation v Smith & Roberts (1992) 23 ATR 494 referred to Ure v Federal Commissioner of Taxation (1981) 34 ALR 237 referred to Franklin's Selfserve Pty Ltd v Federal Commissioner of Taxation (1970) 125 CLR 52 referred to Spassked Pty Ltd v Federal Commissioner of Taxation (2003) 2003 ATC 5099 referred to Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 cited Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634 cited Commissioner of Taxation v South Australian Battery Makers Pty Ltd (1978) 140 CLR 654 cited Sun Newspapers Ltd & Associated Newspapers v Federal Commissioner of Taxation (1938) 61 CLR 337 referred to British Insulated & Helsby Cables v Atherton (1925) 10 TC 155 cited Commissioner of Taxation (WA) v Boulder Perseverance Ltd (1937) 58 CLR 223 cited Bauer v Commissioner of Internal Revenue (1984) 748 F 2d 1365 (9 Circ)referred to Hardman v United States (1987) 827 F 2d 14090 (9 Circ) referred to Australian National Hotels Ltd v Federal Commissioner of Taxation (1988) 19 FCR 234 considered Mullens Investments Pty Ltd v Federal Commissioner of Taxation (1976) 135 CLR 290 cited Avco Financial Services Ltd v Federal Commissioner of Taxation (1981) 150 CLR 510 cited Federal Commissioner of Taxation v Hart (2004)78 ALJR 875 followed Commissioner of Taxation v Consolidated Press (2001) 207 CLR 235 referred to Federal Commissioner of Taxation v Spotless Services (1996) 186 CLR 404 considered Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 referred to Upfold "When might Dividends be Deductible" (2001) 30 Australian Tax Review 5 Parsons: Income Taxation in Australia (1985) MACQUARIE FINANCE LIMITED v COMMISSIONER OF TAXATION N 817 of 2002