Coles Myer Finance Ltd v Commissioner of Taxation [1993] HCA 29

High Court of Australia Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. Coles Myer Finance Ltd v Commissioner of Taxation [1993] HCA 29

ORDER Appeal allowed with costs. Set aside the orders of the Full Court of the Federal Court. Matter stood over to 19 May 1993 for the making of final orders in accordance with the reasons for judgment. Parties to bring in on or before 12 May 1993 minutes of order. The Court answered the questions in the special case as follows: The respondent to pay the appellant's costs in the special case in the Federal Court.

Cur. adv. vult.

The following written judgments were delivered:—

1993, April 29 Mason C.J., Brennan, Dawson, Toohey and Gaudron JJ.

This is an appeal by Coles Myer Finance Ltd. ("the taxpayer") against the answers given by the Full Court of the Federal Court (Sweeney, Northrop and Wilcox JJ.) to questions in a special case stated by the Administrative Appeals Tribunal ("the Tribunal") pursuant to s. 45 of the Administrative Appeals Tribunal Act 1975 Cth and O. 50 of the Federal Court Rules for the decision of the Federal Court. The questions relate to the taxpayer's appeal to the Tribunal against its amended assessment of income tax for the year ended 30 June 1984. The facts, as related in the special case, may be shortly stated. The statement which follows is very largely taken from the reasons for judgment of the Full Court of the Federal Court.

The facts

The taxpayer carries on business as a finance company, acting as financier to the Coles Myer group of companies. It has carried on that business since 1981. For the purposes of that business, it raises finance from various sources, including non-related companies. To that end, during the taxation year in question, the taxpayer drew, and sold at less than their face values, both bills of exchange and promissory notes. The majority of both the bills of exchange and the promissory notes were drawn and paid in the relevant financial year. No question arises in this case about those bills or notes. But a significant proportion were outstanding at 30 June 1984 and it is with them that this case is concerned. Bills of exchange having a face value of $70,000,000 were then outstanding. They had been discounted by the taxpayer by way of sale for $67,624,421. The face value of the outstanding promissory notes was $40,000,000. They had been discounted by way of sale for $37,640,106. In its return of income for the year ended 30 June 1984 the taxpayer claimed to deduct the difference between the face values and the sale price — $2,375,579 for the bills and $2,359,893 for the notes. The Commissioner of Taxation ("the Commissioner") disallowed that claim on the basis that no relevant loss or expenditure was incurred until the instruments were paid out in the following taxation year. The taxpayer objected to the assessment, contending that the relevant loss or expenditure was incurred when the taxpayer drew the bills and issued the notes because it then incurred a liability to pay the full face value, notwithstanding that the date for payment was a future date. On disallowance of the objection, the matter was referred to the Tribunal.