Commissioner of Taxation of the Commonwealth of Australia v Nilsen Porcelains (Australia) Pty Ltd & Ors Nilsens Broadcasting Service Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia [1979] FCA 101

Commissioner of Taxation of the Commonwealth of Australia v Nilsen Porcelains (Australia) Pty Ltd & Ors Nilsens Broadcasting Service Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia [1979] FCA 101

At the end of the income year, the taxpayers were not under a present pecuniary liability in respect of annual or long service leave; rather, liabilities would arise only when leave was taken or employment terminated as prescribed under the relevant awards. Consequently, no deduction was allowable under s.51(1) for provisions made for anticipated future payments for leave that had not crystallized as an existing liability at the end of the income year.

Parties
Appellant/respondent: Commissioner of Taxation of the Commonwealth of Australia; Respondent/appellant: Nilsen Porcelains (Australia) Pty. Limited; Respondent/appellant: Nilsen's Broadcasting Service Pty. Limited; Respondent/appellant: Nilsen Development Laboratories Pty. Limited
Jurisdiction
Australia
Judgment Date
08 October 1979
Procedural Posture
Appeal and Cross Appeals / Judgment on Appeal From Supreme Court of Victoria to Federal Court of Australia
Outcome
Appeals by the Commissioner allowed; cross-appeals by the taxpayers dismissed.
Legal Topics
Income Tax Deductions, Annual Leave, Long Service Leave, Accountancy Practice Vs Statutory Test, S.51(1) Income Tax Assessment Act 1936
Taxation Law Employment Law Income Tax Deductions Annual Leave Long Service Leave Accountancy Practice Vs Statutory Test S.51(1) Income Tax Assessment Act 1936

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Parties

Commissioner of Taxation of the Commonwealth of Australia

Appellant/respondent

Nilsen Porcelains (Australia) Pty. Limited

Respondent/appellant

Nilsen's Broadcasting Service Pty. Limited

Respondent/appellant

Nilsen Development Laboratories Pty. Limited

Respondent/appellant

Procedural Posture

Appeal and Cross Appeals / Judgment on Appeal From Supreme Court of Victoria to Federal Court of Australia

Legal Issues

  1. 1 Whether anticipated future payments for annual and long service leave are deductible under s.51(1) of the Income Tax Assessment Act 1936
  2. 2 Whether such liabilities are 'losses or outgoings incurred' in gaining or producing assessable income at the relevant time
  3. 3 Whether the taxpayer was definitively committed to those liabilities within the meaning of the statutory test

Ratio Decidendi

At the end of the income year, the taxpayers were not under a present pecuniary liability in respect of annual or long service leave; rather, liabilities would arise only when leave was taken or employment terminated as prescribed under the relevant awards. Consequently, no deduction was allowable under s.51(1) for provisions made for anticipated future payments for leave that had not crystallized as an existing liability at the end of the income year.

Court Disposition

Appeals by the Commissioner allowed; cross-appeals by the taxpayers dismissed.

Orders

  • The appeals by the Commissioner are allowed.
  • The orders of the Supreme Court of Victoria are set aside.