Case Note on City Link Melbourne Ltd v Federal Commissioner of Taxation (2004) 57 ATR 316

Essay by michelle9182University, Bachelor'sB, April 2006

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The facts of the case were that the taxpayer (formally called Transurban) entered into an agreement with the Victorian Government for the City link project. The taxpayer was required to pay the "concession fees" to the Victorian Government in return for the right to build and operate toll roads. The Concession Deed provided that the taxpayer with the option of paying the concession fees by the issue of concession notes with the face value of amount payable. The Concession was to be continued, but subject to the Concession Deed until the end of the Concession Period. The taxpayer claimed a deduction for the face value of the notes. The Commissioner submitted that the expenses were not deductible and that they were of a capital nature. However, the taxpayer argued that the concessions were of a revenue nature and deductible under the general deduction provision.

The issues included whether the concession fees were a loss or outgoing incurred in - and properly referable to - the income years in which they arose under the terms of the concession deed.

The appeal also considered the characterisation of the concession fees, that is, whether they were losses or outgoings of a revenue or capital nature. In this regard, the issues raised consisted of whether the concession fees were properly regarded as consideration paid for the grant of a monopoly or other anti-competitive right; or a sharing of profits or payments akin to a dividend, or otherwise precluded from deduction as losses or outgoings of capital or of a capital nature.

At first instance in the Federal Court, the primary judge concluded that the concession fees were not deductible. His Honour was of the view that the Concession Fees were, in the relevant statutory sense, "incurred" by Transurban in each year of income. Further...