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18 Mar 1010 Commissioner's appeal on deductible bad debts dismissed - BHP Billiton

The Full Federal Court (Sundberg, Stone and Edmonds JJ) has dismissed the Commissioner's appeal from the decision of Gordon J, who had held that a finance company (BHP Billiton Finance Limited) that was a member of the BHP Billiton group and that had lent funds to other members of the BHP Billiton group was entitled to a deduction under s 25-35(1)(b) ITAA 1997 for 2 bad debts that it wrote off as bad in the 2000 income year. The amount of the 2 debts written of was $1,845,833,281.34, and $310,881,702.40 respectively.

In dismissing all the Commissioner's grounds of appeal, the Full Court held that:

  • the taxpayer was carrying on a business of lending money and had been for many years;
  • the loans giving rise to the bad debts were made by the taxpayer in the ordinary course of its business of lending money;
  • in the alternative, the losses were deductible under s 8-1 ITAA 1997;
  • the taxpayer did not obtain a tax benefit for the purposes of Part IVA ITAA 1936; and
  • Div 243 ITAA 1997 did not apply to one of the loans, because it was not a limited recourse debt.

FCT v BHP Billiton Finance Limited [2010] FCAFC 25 (Full Federal Court; Sundberg, Stone and Edmonds JJ; 17 March 2010).


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