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The Federal Court (Gordon J) has held that payments made by the taxpayer (SPI), the licensee of an electricity transmission business in Victoria, to the Victorian Treasurer totalling $177.5 million during the financial years 1998 to 2000 were not deductible under s 8-1 ITAA 1997.

The payments were made as part of a mechanism for limiting the charges that SPI could charge its customers.

After considering all the evidence, and the earlier cases, Gordon J held that payments were not a cost of SPI of deriving its income. Rather, they were payments out of SPI’s profits after the calculation of SPI’s taxable income. They were not an outgoing incurred in gaining or producing SPI’s assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing such assessable income.

In the alternative, Gordon J held that the payments were capital or of a capital nature.

SPI PowerNet Pty Ltd v FCT [2013] FCA 924 (Federal Court, Gordon J, 12 September 2013).


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