Academy Cleaning & Security Pty Ltd v Deputy Commissioner of Taxation [2017] FCA 875

FEDERAL COURT OF AUSTRALIA

Academy Cleaning & Security Pty Ltd v Deputy Commissioner of Taxation [2017] FCA 875 File number: NSD 1073 of 2014

Judge: RARES J

Date of judgment: 3 August 2017

Catchwords: INCOME TAX – assessable income – appeal against objection decision to disallow taxpayer's objection to notice of amended assessment – where taxpayer paid non-refundable deposit of $63,000 and claimed deduction of $420,000 from assessable income after entering into agreement to pay balance of $357,000 purchase price at uncertain future time when notice given that future property then deliverable – where Deputy Commissioner conceded deposit outgoing incurred in year of income – deductibility of balance of purchase price under s 8-1(1)(a) of Income Tax Assessment Act 1997 (Cth) – whether balance outgoing "incurred" in gaining or producing taxpayer's assessable income – whether liability to pay balance defeasible INCOME TAX – assessable income – deductibility of outgoing under s 8-1(1)(b) of Income Tax Assessment Act 1997 (Cth) – whether whole, or part, of $420,000 outgoing necessarily incurred in carrying on taxpayer's business for purpose of gaining or producing assessable income – where outgoing made to acquire future property to be created in commercially speculative and unspecified projects – where taxpayer used outgoing as promotional tool – whether whole, or part, of outgoing appropriate and adapted for ends of taxpayer's business – whether sufficient connection between outgoing and taxpayer's business INCOME TAX – whether taxpayer obtained tax benefit under s 8-1(1) of Income Tax Assessment Act 1997 (Cth) in connection with scheme to which Pt IVA of Income Tax Assessment Act 1936 (Cth) applied – whether "dominant purpose" of taxpayer, through its director or his professional advisors, entering into agreement was to obtain tax benefit of deduction of $420,000, or $63,000 – where subject matter of agreement priced at well above market price – where agreement lacked clarity and did not oblige vendor ever to deliver any property or complete transaction to trigger taxpayer's obligation to pay balance of purchase price – where agreement entered into shortly before end of tax year – where no evidence of taxpayer investigating other investment options