The decision concerned whether the taxpayer (Visy USA) could claim a deduction for an indemnity fee paid to a related party in relation to a Forward Exchange Contract which the ATO submitted was not commercial or made with a view to profit.
The Federal Court at first instance held that the indemnity fee was deductible. On appeal, the Full Federal Court rejected the Commissioner's challenge to specific findings of secondary fact that underpinned the Federal Court's conclusion that Visy USA entered into the Forward Exchange Contract with a not insignificant purpose of profit-making. The Full Federal Court found no error in the Federal Court's finding that a business activity may be carried on notwithstanding that the activity may be dependent, in part, on chance.
The Decision Impact Statement states that the "ATO respectfully accepts that the various statements of legal principle in the [Full Federal Court] decision are correct".