The Commissioner of Taxation v Montgomery: an opportunity lost

Dabner, Justin (1999) The Commissioner of Taxation v Montgomery: an opportunity lost. Journal of Australian Taxation, 2 (6). pp. 433-436.

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Following the Full Federal Court decision in Montgomery v FC of T 98 ATC 4120, a basis on which to reconcile the lease incentive cases was discernible. Namely, where there was an obligation to spend the incentive payment on capital expenditure that did not increase the value of the taxpayer's property and did not provide a tax deduction then there would be no assessable gain.

This rationalisation of the decisions was also compatible with a possible trend towards a new theory by which to identify assessable income. This "gain" theory of income has much to recommend itself over the traditional characterisation approach that is often fraught with fine distinctions.

Unfortunately the High Court, by subsequently allowing the Commissioner's appeal in Montgomery, has nullified this purported rationalisation and cast doubt on some of the earlier decisions. Furthermore, its express rejection of the gain theory in favour of the traditional characterisation approach is a retrograde step. In fact the difficulties that bedevil the characterisation approach are well illustrated by the decision.

Item ID: 32854
Item Type: Article (Scholarly Work)
ISSN: 1440-0405
Date Deposited: 01 Dec 2017 02:05
FoR Codes: 18 LAW AND LEGAL STUDIES > 1801 Law > 180125 Taxation Law @ 100%
SEO Codes: 97 EXPANDING KNOWLEDGE > 970118 Expanding Knowledge in Law and Legal Studies @ 100%
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