Steele v Deputy Commissioner of Taxation [1999] HCA 7

High Court of Australia Gleeson CJ Gaudron, Gummow, Kirby and Callinan JJ Steele v Deputy Commissioner of Taxation [1999] HCA 7

ORDER

1. Appeal allowed.

2. Set aside the order of the Full Court of the Federal Court made on 18 March 1997. In lieu thereof, order that the appeal to that Court be allowed.

3. Set aside the orders of R D Nicholson J made on 29 January 1996, except in so far as they relate to the question of penalty.

4. Set aside the decision of the Administrative Appeals Tribunal made on 4 March 1994.

5. Remit the matter to the Administrative Appeals Tribunal for a rehearing of the appellant's appeal against the disallowance of her objection with or without the hearing of further evidence as the Tribunal may determine.

6. The respondent pay the appellant's costs of the appeal to this Court, of the appeal to the Full Court of the Federal Court, and of the proceedings before R D Nicholson J.

Cur adv vult

The following written judgments were delivered: —

4 March 1999 Gleeson CJ, Gaudron and Gummow JJ.

1. The principal issue in this appeal concerns the deductibility, for income tax purposes, of interest where the borrowed money has been used to purchase and hold a capital asset intended to be developed for income-producing purposes.

2. In respect of the year of income ending 30 June 1987, the appellant claimed but was denied a deduction for interest, and certain other relatively minor outgoings, under s 51(1) of the Income Tax Assessment Act 1936 Cth (the Act). An objection by the appellant to the respondent's assessment was disallowed. The other outgoings were rates and rents. It is common ground that the decision in relation to the interest will apply equally to those other amounts. The disallowance by the respondent of the appellant's objection to the assessment was referred to the Administrative Appeals Tribunal (the Tribunal) pursuant to s 187 of the Act. The respondent's decision was substantially upheld, although it was varied in certain respects. An appeal to the Federal Court was dismissed by R D Nicholson J [1] . The appellant appealed to the Full Court of the Federal Court which, by majority (Burchett and Ryan JJ, Carr J dissenting) dismissed her appeal [2] .