Edited version of private advice

Authorisation Number: 1052198916548

Date of advice: 30 November 2023

Ruling

Subject: Employee share scheme

Question

Will the Company be entitled to deduct an amount under section 8-1 of the Income Tax Assessment Act 1997 for the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or on market acquisition of, ordinary shares in the Company to satisfy the issue of Shares by the Trustee to employees, directors and individual service providers ('Eligible Person') pursuant to the Plan?

Answer

Yes.

Question 2

Will the Company's irretrievable cash contributions to the Trustee, to fund the subscription for, or on-market acquisition of, Shares to satisfy the Company's obligations with respect to the issue of Shares to Eligible Persons pursuant to the Plan, be deductible to the Company at the time determined by section 83A-210 of the ITAA 1997?

Answer

Yes.

Question 3

Will the Company be entitled to deduct an amount under section 8-1 of the ITAA 1997, in respect of costs incurred in relation to the on-going administration of the Plan or the Trust?

Answer

Yes.

Question 4

Will the Company be entitled to deduct an amount under section 40-880 of the ITAA 1997, in respect of costs incurred in relation to the establishment of the Plan or the Trust?

Answer

Yes.

Question 5

Will the Commissioner seek to make a determination under subsection 177F (1) of the Income Tax Assessment Act 1936 ('ITAA 1936'), as a result of section 177D of the ITAA 1936, to deny, in part or in full, any deduction claimed by the Company in respect of the:

a) Irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or on-market acquisition of, Shares by the Trustee to satisfy the issue of Shares to Eligible Persons pursuant to the Plan; or

b) Costs incurred by the Company in relation to the ongoing administration of the Plan or the Trust; or

c) Costs incurred by the Company in relation to the establishment of the Plan or the Trust

Answer

No.

Question 6

Will the amount received by the Company (Parent Company) from an employee entity (Subsidiary Company) outside the Company's tax consolidated group (TCG) as reimbursement for the expenses incurred in establishing the EST be included in its assessable income under sections 6-5, 6-10 or 20-20 of the ITAA 1997?

Answer

No.

Question 7

Will the amount received by the Company from an employee entity outside the Company's TCG as reimbursement for the expenses incurred in the ongoing administration of the EST, and managing the tax affairs of the EST be included in its assessable income under sections 6-5, 6-10 or 20-20 of the ITAA 1997?

Answer

No.

Question 8

Will the provision of Shares or rights to Shares to employees and directors under the Plan constitute a 'fringe benefit' within the meaning of that term in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 ('FBTAA')?

Answer

No.

Question 9

Will the irretrievable cash contributions made by the Company to the Trustee, to subscribe for, or acquire on-market, Shares pursuant to the Plan or to fund the ongoing administration of the Trust or to establish the Trust, constitute a 'fringe benefit' within the meaning of that term in subsection 136(1) of the FBTAA?

Answer

No.

Question 10

Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the aggregated fringe benefits taxable amount to the Company, by the amount of tax benefit gained from the irretrievable cash contributions made by the Company to the Trustee, to fund the subscription for, or on-market acquisition of, Shares by the Trustee?

Answer

No.

This ruling applies for the following periods:

For Questions 1, 2, 3, 4, 5, 6, and 7:

•         Income year ended 30 June 20xx

•         Income year ending 30 June 20xx

•         Income year ending 30 June 20xx

•         Income year ending 30 June 20xx

•         Income year ending 30 June 20xx

For Questions 8, 9 and 10:

•         Year ended 31 March 20xx

•         Year ending 31 March 20xx

•         Year ending 31 March 20xx

•         Year ending 31 March 20xx

•         Year ending 31 March 20xx

Relevant facts and circumstances

The Company is the head company of a tax consolidated group.

One employee entity is part of the tax consolidated group, while one employee entity is not part of the tax consolidated group.

The Company established an employee share plan (the Plan) that is governed by the Plan Rules as part of its remuneration and reward program for its employees. Under the Plan, participants are provided Company shares that are allocated and held in the Trust on behalf of the participant until the relevant vesting date.

The employees of the Company are Australian residents and are engaged only in activities that generate assessable income for the Company.

The Trust was established to facilitate the provision of shares to participants under the Plan. The Trust is governed by the Trust Deed.

The Trustee of the Trust is an independent third party.

The Company will make cash contributions to the Trustee to fund the acquisition of Company shares. These contributions are irretrievable and non-refundable because the Company is not a beneficiary of the Trust and is not entitled to any part of the Trust fund (including shares held by the Trustee).

The Company incurred costs to establish the Trust and Plan. The Company also incurred costs (and will continue to incur costs) for the ongoing administration of the Trust.

The Company receives reimbursements from the employee entity that is not part of the Company's tax consolidated group for costs in establishing and maintaining the EST.

On DD Month YYYY, the Trust Deed was executed and the executed Trust Deed took effect from that date onwards.

Relevant legislative provisions

Income Tax Assessment Act 1936 Part IVA

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 20-20

Income Tax Assessment Act 1997 section 40-880

Income Tax Assessment Act 1997 section 83A-210

Income Tax Assessment Act 1997 Division 104

Fringe Benefits Tax Assessment Act 1986 section 67

Fringe Benefits Tax Assessment Act 1986 section 136

Reasons for decision

All legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated.

Question 1

Detailed reasoning

Subsection 8-1(1) will allow you to deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, pursuant to subsection 8-1(2), you cannot deduct a loss or outgoing to the extent that it is a loss or outgoing of capital, or of a capital nature.

The Company carries on a business which produces assessable income. The Company operates an employee share scheme (ESS) as part of its remuneration strategy.

Under the Plan, the Company grants awards to employees and makes irretrievable cash contributions to the Trustee (in accordance with the Plan and the Trust Deed) which the Trustee will use to acquire Company shares (on-market or by subscription) for allocation to participants to satisfy their awards.

Incurred in carrying on a business

The Company provides the Trustee with all the funds required to enable the Trustee to subscribe for or acquire the Company shares.

The contributions made by the Company are irretrievable and non-refundable to the Company in accordance with the Trust Deed as:

•         no group entity is a beneficiary or has any entitlement to any part of the Trust's funds at any time

•         during the life of the Trust, the Trustee can only deal with the Trust's funds and property for the benefit of the beneficiaries; and

•         where the Trust is terminated and wound up, no group entity is entitled to any of the Trust's funds.

The Company has granted (and will in the future grant) awards under the Plan as part of its remuneration and reward program for participants. The contributions to the Trustee are part of an on-going series of payments in the nature of remuneration of its employees and incurred to satisfy the awards as part of the remuneration arrangement.

Question 2

Detailed reasoning

Not capital or of a capital nature

The Company has made (and will continue to make) irretrievable contributions to the Trustee to satisfy its obligations under the Plan. This indicates that the irretrievable contributions are a periodic outlay (rather than a one-off).

While the contributions may secure an enduring or lasting benefit for the employer that is independent of the year to year benefits that the employer derives from a loyal and contented workforce, that enduring benefit is considered to be sufficiently small. Therefore, the payments are not capital, or of a capital nature.

Accordingly, the Company will be entitled to deduct an amount under section 8-1 for its irretrievable cash contributions to the Trustee to acquire Shares to satisfy ESS interests issued to its employees pursuant to the Plan.

Section 83A-210 applies to determine the timing of the deduction, but only in respect of the contribution provided to the Trust to purchase ESS interests under an ESS that occurs before the ultimate beneficiary acquires the ESS interest. Further information is available in ATO Interpretative Decision ATO ID 2010/103 Income Tax- Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust.

The Plan is an ESS for the purposes of subsection 83A-10(2) as it is a scheme under which beneficial interests in the Company shares (and are ESS interests under subsection 83A-10(1)) are granted to employees as a result of their employment.

The Plan contains a number of interrelated components which includes the provision of irretrievable cash contributions by the Company to the Trustee. These contributions enable the Trustee to acquire Company shares for the purpose of enabling each participant, indirectly as part of the Plan, to acquire ESS interests.

The deduction for the irretrievable cash contribution can only be deducted from the assessable income of the Company in the income year when the relevant beneficial interest in a share in the Company is acquired by a participant under the Plan.

Question 3

Detailed reasoning

In addition to the reasoning provided in question 1 above, the Company incurs ongoing administration costs for operating the Trust and has appointed the Trustee to administer the Trust. The Company must pay all Trust Expenses which include brokerage fees, audit fees, tax return fees, bank charges and other ongoing administrative expenses.

These costs are regular and recurrent which are deductible under section 8-1 as they are costs necessarily incurred by the Company in running the ESS while carrying on its business for the purpose of gaining or producing its assessable income. These costs are not capital or of a capital nature as the loss or outgoings are regular, recurrent and part of the ordinary employee remuneration costs of the Company (Taxation Determination TD 2022/8 Income tax: deductibility of expenses incurred in establishing and administering an employee share scheme).

Question 4

Detailed reasoning

Establishment expenses are outgoings associated with the creation of an ESS and include fees and start-up costs incurred in establishing the employee share trust (EST) and ESS plan rules.

Section 40-880 allows deductions for certain business capital expenditure that fall outside the scope of the deduction provisions of the income tax law. It requires the expenditure to be capital and in relation to the business. As this expenditure relates to remuneration of employees of the employer company who work within that business, the expenditure must be incurred in relation to that business.

Section 40-880 contains limitations and exceptions in subsections 40-880(3) to (9) which may prevent a deduction being allowed. Subsection 40-880(3) indicates that the expenditure is only deductible to the extent that the business is carried on for a taxable purpose. The other limitations and exceptions in subsections 40-880(4) to (9) do not prevent the expenses from being deductible under section 40-880.

Therefore, establishment expenses of the Plan or the Trust are deductible in equal proportions over 5 years under section 40-880 to the extent that the business carried on is for a taxable purpose (Taxation Determination TD 2022/8 Income tax: deductibility of expenses incurred in establishing and administering an employee share scheme).

Question 5

Detailed reasoning

Part IVA of the ITAA 1936 is a general anti-avoidance provision which gives the Commissioner the power to cancel a 'tax benefit' that has been obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies.

The Commissioner generally accepts that a general deduction may be available where an employer provides money or other property to an employee share trust where the conditions of Division 83A of the ITAA 1997 are met.

In this case, the scheme does not contain the elements of artificiality or unnecessary complexity and the commercial drivers sufficiently explain the entry into the use of the employee share trust arrangement.

Therefore, having regard to the eight factors set out in subsection 177D(2) of the ITAA 1936, the Commissioner has concluded that the scheme is not being entered into or carried out for the dominant purpose of enabling the Company to obtain a tax benefit.

Question 6

Detailed reasoning

Is the Establishment Recharge Amount ordinary income?

The expression 'ordinary income' is defined in s 995-1 and s 6-5 of the ITAA 1997 as 'income according to ordinary concepts'.

There is a long line of authorities that consider the question as to whether an amount is 'ordinary income'. Deputy President Forgie in Confidential v Commissioner of Taxation listed propositions that are useful in determining whether an amount is ordinary income.[1] Relevantly, he stated:

(1) Although income is not defined by the Act, its provisions give some indication of its meaning....

(2)... Whether a receipt is to be treated as income or not is determined according to 'the ordinary concepts and usages of mankind'... except where [the] statute sweeps in particular receipts or amounts which would not ordinarily be taken to fall within the concept.

(3)... Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form....

... The word 'gains' is not here used in the sense of net profits of the business for the topic under discussion is assessable income, that is to say gross income. But neither is it synonymous with 'receipts'. It refers to amounts which have not only been received but have 'come home' to the taxpayer' and that must surely involve, if the word 'income' is to convey the notion it expresses in the practical affairs of business life, not only that the amounts received are unaffected by legal restrictions, as by reason of a trust or charge in favour of the payer - not only that they have been received beneficially - but that the situation has been reached in which they may properly be counted as gains completely made, so that there is neither legal nor business unsoundness in regarding them without qualification as income derived.

The ultimate inquiry in either kind of case, of course, must be whether that which has taken place, be it the earning or the receipt, is enough to satisfy the general understanding among practical business people of what constitutes a derivation of income....

(5)... The question in each particular case is as to the character of the receipt in the hands of the recipient.... The test to be applied is an objective, not a subjective, test....

(6)... It does not depend upon whether it was a payment or provision that the payer or provider was lawfully obliged to make.... The motives of the donor do not determine the answer. They are, however, a relevant circumstance....

(8)... whether a particular receipt has the character of the derivation of income depends upon its quality in the hands of the recipient, not the character of the expenditure by the other party...

(11)... To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose if engaging in the transaction, venture or business. The factors relevant to the ascertainment of the character of a receipt of money are not necessarily the same as the factors relevant to the ascertainment of the character of its payment.

(12) There is a difficulty in making good absolute propositions in this field. In Federal Commissioner of Taxation v Montgomery..., Gaudron, Gummow, Kirby and Hayne JJ recognised that:

income is often (but not always) a product of exploitation of capital; income is often (but not always) recurrent or periodical; receipts from carrying on a business are mostly (but not always) income.

In Federal Commissioner of Taxation v The Myer Emporium (Myer Emporium) the High Court observed that 'ordinary income' can include income derived from a transaction which was 'extraordinary when judged by reference to the ordinary course of the taxpayers business:'[2]

Because a business is carried on with a view to profit, a gain made in the ordinary course of carrying on the business is invested with the profit-making purpose, thereby stamping the profit with the character of income. But a gain made otherwise than in the ordinary course of carrying on the business which nevertheless arises from a transaction entered into by the taxpayer with the intention or purpose of making a profit or gain may well constitute income.

Whether it does depends very much on the circumstances of the case. Generally speaking, however, it may be said that if the circumstances are such as to give rise to the inference that the taxpayer's intention or purpose in entering into the transaction was to make a profit or gain, the profit or gain will be income, notwithstanding that the transaction was extraordinary judged by reference to the ordinary course of the taxpayer's business. Nor does the fact that a profit or gain is made as the result of an isolated venture or a "one-off" transaction preclude it from being properly characterised as income.

In relation to reimbursements that are received, it has been held that:[3]

There is no general principle of Australian tax law to the effect that amounts received by way of reimbursement or compensation for deductible expenses are assessable. The receipt must be otherwise income, according to ordinary concepts, to be assessable, and an amount is not income simply because it is a recoupment of a deductible expense: Federal Commissioner of Taxation v Rowe (1997) 187 CLR 266.

Thus, it may be that in some instances a reimbursement may be assessable in nature, for example in HR Sinclair a recoupment/reimbursement of a royalty to a State body was considered to be ordinary income.[4] Whereas in Batchelor and FC of T the AAT concluded that a refund of a deposit on an unsuccessful property purchase was not ordinary income of the partnership.[5] It was not a 'gain or profit' to the business being carried on by the partnership.

In determining whether the amount Parent Company received from Subsidiary Company is ordinary income, the character of the receipt in the hands of Parent Company must be considered.[6] On the facts:

•         Parent Company is not carrying on a business of establishing, managing and/or selling EST's.

•         It appears that Parent Company's intention or purpose of establishing the EST was undertaken on behalf of Subsidiary Company and that Subsidiary Company would reimburse Parent Company for the expenses Parent Company incurred, and

•         Parent Company had no intention of making a profit or gain from the transaction, and it did not charge Subsidiary Company any service fee/mark-up.

Looking at the totality of events, objectively it seems that the better view is that the Establishment Recharge Amount received by Parent Company is not an amount that was incurred in the ordinary course of carrying on its business. There was no intention to make a gain from the transaction. Further, as mentioned in Victoria Power Networks Pty Ltd v Federal Commissioner of Taxation in applying GP International Pipecoaters:[7]

The mere fact that a taxpayer is engaged in a business at the time of receiving a payment and the payment bears some connection to that business will not be sufficient to stamp the receipt with a revenue character.

Further still, this was not a one-off transaction that was undertaken to make a gain or profit. Consequently, the reimbursement Parent Company is to receive from Subsidiary Company is not income according to ordinary concepts and is therefore not included in Parent Company's assessable income under subsection 6-5(1) of the ITAA 1997.

Is the Establishment Recharge Amount statutory income?

The expression 'statutory income' is defined in section 995-1 by reference to section 6-10 of the ITAA 1997 as follows.

(1) Your assessable income also includes some amounts that are not *ordinary income.

Note: These are included by provisions about assessable income.

For a summary list of these provisions, see section 10-5.

(2) Amounts that are not *ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income.

Note 1: Although an amount is statutory income because it has been included in assessable income under a provision of this Act, it may be made exempt income or non-assessable non-exempt income under another provision: see sections 6-20 and 6-23.

Note 2: Many provisions in the summary list in section 10-5 contain rules about ordinary income. These rules do not change its character as ordinary income.

Section 10-5 of the ITAA 1997 provides that certain reimbursements and recoupments can be assessable income (it not being ordinary income), as follows.

Table 1: Certain reimbursements and recoupments can be assessable income (it not being ordinary income) as follows:

In working out whether an amount is an assessable recoupment (and therefore included in a taxpayer's assessable income), a three-step process is required:[8]

Table 2: In working out whether an amount is an assessable income, a three-step process is required:

Step 1

Pursuant to subsection 20-20(1) of the ITAA 1997, the Establishment Recharge Amount will not be an assessable recoupment as it not ordinary income as concluded above and neither is it statutory income under section 6-10.

Step 2

The Establishment Recharge Amount is not an insurance or indemnity amount so therefore subsection 20-20(2) is not satisfied.

Step 3

The final possibility is that the Establishment Recharge Amount is an assessable recoupment pursuant to subsection 20-20(3).

Subsection 20-20(3) of the ITAA 1997 provides that an amount received as recoupment of a loss or outgoing is an assessable recoupment if:

Other recoupment

(3) An amount you have received as *recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if:

(a) you can deduct an amount for the loss or outgoing for the *current year; or

(b) you have deducted or can deduct an amount for the loss or outgoing for an earlier income year;

under a provision listed in section 20-30.

Parent Company cannot deduct the expenses it incurred establishing the EST on behalf of Subsidiary Company under a provision contained in section 20-30 of the ITAA 1997. Accordingly, the Establishment Recharge Amount that Parent Company received from Subsidiary Company for those expenses is not an assessable recoupment under subsection 20-20(3) of the ITAA 1997.

Consequently, there is no requirement for Parent Company to include the Establishment Recharge Amount in its assessable income under sections 6-10 and section 20-20 of the ITAA 1997.

Question 7

Detailed reasoning

In determining whether the Ongoing Expense Recharge Amount received from Subsidiary Company is ordinary income, the character of the receipt in the hands of Parent Company must be considered. On the facts:

•         Parent Company is not carrying on a business of establishing, managing and/or selling EST's.

•         It appears that Parent Company's intention or purpose of establishing the EST was undertaken on behalf of Subsidiary Company. It was always intended that Subsidiary Company would reimburse Parent Company for the expenses incurred, and

•         Parent Company had no intention of making a profit or gain from the transaction. Parent Company did not add any margin to the expenses recharged - it simply recouped what it had expended.

As explained in Question 6 (above), the receipt must be income according to ordinary concepts for it to be assessable, it is not sufficient that is a recoupment of an otherwise deductible expense (see, Re Batchelor and Federal Commissioner of Taxation [2013] AATA 93 at [34]).

Whilst it may be possible for a reimbursement to be assessable income of Parent Company, on the facts the receipt is not ordinary income, nor is the expense it relates to deductible to Parent Company.

Question 8

Detailed reasoning

An employer's liability to fringe benefits tax (FBT) arises under section 66 of the FBTAA, which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax.

In general terms, a 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee. However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs 136(1)(f) to (s) of the FBTAA.

In particular, paragraph 136(1)(h) excludes a benefit constituted by the acquisition of an ESS interest under an ESS (within the meaning of the ITAA 1997) to which Subdivision 83A-B or 83A-C applies.

The Commissioner accepts that the Plan is an ESS and the shares provided under the Plan are ESS interests to which Subdivision 83A-B or 83A-C applies.

Accordingly, the provision of ESS interests under the Plan will not be subject to FBT on the basis that they are acquired under an ESS (to which Subdivision 83A-B or 83A-C will apply) and are thereby excluded from being a fringe benefit by virtue of paragraph 136(1)(h) of the FBTAA.

Question 9

Detailed reasoning

Based on the available facts, including the executed Trust Deed, the Trustee will exercise its powers and obligations as set out the relevant clause of the executed Trust Deed.

Accordingly, the Trust will be considered an 'employee share trust' for the purposes of subsection 130-85(4).

Under the scheme, the Trustee acquires money from the Company, to fund the acquisition of Shares, through the irretrievable contributions paid by the Company to it. As the Trust will be considered an employee share trust, the irretrievable contributions made by the Company will not constitute a 'fringe benefit' by virtue of the exclusion under paragraph 136(1)(ha) of the FBTAA.

Question 10

Detailed reasoning

Section 67 of the FBTAA is the general anti-avoidance provision of that Act.

Under subsection 67(1) of the FBTAA, where:

(a)  an employer (the 'eligible employer') has obtained or, but for section 67, would obtain, a tax benefit in connection with an arrangement under which a benefit is or was provided to a person; and

(b)  it would be concluded that the person, or one of the persons, who entered into or carried out the arrangement or any part of the arrangement did so for the sole or dominant purpose of enabling the eligible employer or the eligible employer and another employer(s) to obtain the tax benefit.

The Commissioner may make a determination that the aggregate fringe benefits amount (if any) of the eligible employer of the year of tax be increased by the amount of the tax benefit.

Subsection 67(2) provides that a tax benefit arises in respect of a year of tax in connection with an arrangement if under the arrangement:

(i)    a benefit is provided to a person;

(ii)   an amount is not included in the aggregate fringe benefits amount of the employer; and

(iii) that amount would have been included or could reasonably be expected to have been included in the aggregate fringe benefits amount, if the arrangement had not been entered into.

The identification of a tax benefit requires consideration of the consequences, but for the operation of section 67 of the FBTAA, of an alternative postulate - that is, what would have happened or might reasonably be expected to have happened if the arrangement had not been entered into.

Having regard to the available facts, it is considered that, absent of the present arrangement, the Company would have provided Shares directly to the Participants of the Plan. Under the alternative postulate, an amount would not be expected to be included in the aggregate fringe benefits amount of the Company as the benefit would not be a 'fringe benefit' as defined in subsection 136(1) of the FBTAA. This is because a fringe benefit does not include a benefit constituted by the acquisition of an ESS interest under an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 applies (paragraph 136(1)(h) of the FBTAA) (as set out in Question 6 above, the Plan is considered an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 applies).

Accordingly, the Commissioner will not make a determination under section 67 of the FBTAA to include an amount in the aggregate fringe benefits amount of the Company by the amount of tax benefit gained from irretrievable cash contributions made to the Trustee, to fund the subscription for, or acquisition on-market of, Shares by the Trustee to satisfy the issue of Shares to Australian resident Participants pursuant to the Plan.

[1] [2013] AATA 112 at [833] and [844].

[2] [1987] HCA 18, [14]; (1987) 163 CLR 199 at 209-210.

[3] Re Batchelor and Federal Commissioner of Taxation [2013] AATA 93 at [34]; Re Chang and Federal Commissioner of Taxation [2013] AATA 611; (2013) 96 ATR 406.

[4] H R Sinclair and Son Pty Ltd v Federal Commissioner of Taxation [1966] HCA 39; (1966) 114 CLR 537 (HR Sinclair).

[5] Re Batchelor and Federal Commissioner of Taxation [2013] AATA 93.

[6] GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25; (1990) 170 CLR 124 at 136; Victoria Power Networks Pty Ltd v Federal Commissioner of Taxation [2020] FCAFC 169 at [74].

[7][2020] FCAFC 169 at [74].

[8] Explanatory Memorandum to Tax Law Improvement Bill 1997 and Tax Law Improvement Act 1997.

[9] See subsection 20-25(1) of the ITAA 1997.