The ATO advises that the High Court will hear the appeal by AusNet Transmission Group Pty Ltd (formerly SPI Powernet Pty Ltd) on 9 April 2015.

The appeal concerns the deductibility under 8-1 of the Tax Act of a payment under the Electricity Industry Act 1993 by AusNet as holder of a licence to transmit electricity.

The significance of this case is the consideration of two conflicting principles by the High Court on when a payment is capital or revenue in nature:

  • Justice Fullagar’s dictum in the Colonial Case:

It does not matter how they are calculated, or how they are payable, or when they are payable, or whether they may for a period cease to be payable. If they are paid as parts of the purchase price of an asset forming part of the fixed capital of the company, they are outgoings of capital.

  • Whereas, Chief Justice Barwick in the Cliffs International Case said:

… it clearly and, in my opinion, correctly appears that the fact that payments are made or received in performance of a promise given as part of the consideration for the acquisition of a capital asset does not necessarily mean that the payments are themselves of a capital nature.

[ATO LPR – 26/2/15]