Commissioner of Taxation v Firth (includes corrigendum dated 6 May 2002)

[2002] FCAFC 95

Full Court of the Federal Court17 April 2002

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Interrogate

Catchwords

1. Taxation
2. › Income Tax
3. › Deductions
4. › General deductions
5. › Interest on borrowed money
6. › Limited recourse loans
7. › Whether interest apportionable between revenue and capital components
8. › Whether non-recourse feature a distinct advantage for which separate consideration paid
9. › Income Tax Assessment Act 1997 (Cth), s 8-1
1. Taxation
2. › Income Tax
3. › Deductions
4. › Capital or capital nature exclusion
5. › Interest payments
6. › Whether interest on non-recourse loan partly on capital account
7. › Character of advantage sought
8. › Income Tax Assessment Act 1997 (Cth), s 8-1(2)(a)
1. Taxation
2. › Income Tax
3. › Deductions
4. › Apportionment of outgoings
5. › Single outlay serving multiple objects
6. › Whether apportionment required where loan terms include non-recourse provisions
7. › Income Tax Assessment Act 1997 (Cth), s 8-1

Quick Take

Interest paid on limited recourse loans used to acquire income-producing assets is wholly deductible under s 8-1 of the ITAA 1997 where the non-recourse provisions are integral to the loan and not a distinct or severable advantage for which separate consideration is paid. The Commissioner cannot apportion interest by reference to a benchmark rate to isolate a 'capital protection fee' attributable to the non-recourse feature. A limited recourse provision does not alter the character of a transaction as a loan.