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The Federal Court (Griffiths J) has upheld the Commissioner's appeal from the decision of Professor Deutsch DP of the AAT in Robert Nash and FCT [2012] AATA 719.

The AAT had held that the taxpayer was entitled, under s 25-5(1)(c) ITAA 1997, to deductions for the General Interest Charge (GIC) in each of the income years from 2003 to 2007, being the income years to which the GIC was referable, notwithstanding the fact that no assessment for each of the years in question was issued until 2008.

The AAT referred to s 8AAE of the Taxation Administration Act 1953 which provides that GIC for a day is due and payable at the end of that day and concluded, on this basis, that the GIC in each of those years had been "incurred" for the purposes of s 25-5(1)(c).

Griffiths J disagreed. His Honour referred to the provisions of former s 204 ITAA 1936, which provides when tax becomes due and payable. His Honour made the point that "the liability to pay the GIC relevantly attaches to tax which the person is liable to pay and has not paid. Accordingly, there is a necessary nexus between the relevant statutory provisions governing when income taxation is due and payable and other statutory provisions governing when GIC is due and payable".

His Honour then referred to various judicial decisions which have held that tax only becomes due and payable on the issue of an assessment, including Batagol v FCT [1963] HCA 51 and FCT v Prestige Motors Pty Limited [1994] HCA 39.

His Honour also distinguished the decision of the Full Federal Court in FCT v H [2010] FCAFC 128, in which it was held that a liability for income tax and the GIC accruing thereon was a "present legal obligation" within the meaning of s 109Y of of Div 7A, ITAA 1936, from (in the case of income taxation) the end of the income year in respect of which the tax liability arose and (in the case of the GIC) on each day the tax should have been paid but was not paid notwithstanding that no assessment had been issued.

His Honour did so on the basis that FCT v H was dealing with a differently worded statutory provision, and that there was no inconsistency between GIC being a "present legal obligation" within the meaning of s 109Y and not being "incurred" as expenditure within the meaning of s 25-5(1)(c).

The Commissioner's appeal was upheld.

FCT v Nash [2013] FCA 336 (Federal Court, Griffiths J, 16 April 2013).


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