Kho and Commissioner of Taxation

Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1232
ADMINISTRATIVE APPEALS TRIBUNAL )        No WT2001/3875-3876
  )
TAXATION       APPEALS       DIVISION   )

Re MARK KHO

Applicant

And

COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr B.H. Pascoe, Senior Member
Date13 April 2007
PlacePerth

Decision The Tribunal varies the decisions under review to the extent of allowing as a deduction in each of the relevant years so much of the deductions claimed in relation to the Northern Rivers Tea Tree Oil Projects as were represented by actual cash outlays of the applicant which were not of a capital nature with a determination under s 177F of the Income Tax Assessment Act 1936 that the excess over such amounts is not an allowable deduction and the Tribunal remits these matters to the respondent with a direction to issue amended assessments to give effect to this decision.
.........(Sgd. Mr B H Pascoe).............
Senior Member

INCOME TAX – investment in tea-tree oil farming project – allowable deductions – application of Part IVA – whether Federal Court decision can be distringuished – validity of determination under Part IVA
Income Tax Assessment Act 1936
Re Basten and Others and Commissioner of Taxation [2007] AATA 1128
Re Princi and Others and Commissioner of Taxation [2007] AATA 1119
REASONS FOR DECISION

13 April 2007 Mr B.H. Pascoe, Senior Member

1.      These are applications for review of decisions of the respondent to disallow objections to amended assessments of income tax in relation to the years ended 30 June 1997 and 30 June 1998. The amended assessments were issued to disallow deductions claimed for expenses incurred in respect of the planting, cultivation and maintenance of a tea-tree farm and the production of tea-tree oil. The claims arose from the participation by the applicant in the project known as the Northern River Tea-Tree Project (the project).
2.      Pursuant to s 34J of the Administrative Appeals Tribunal Act 1975 the parties consented to the review being determined without a hearing and the Tribunal having regard to the evidence and submissions in the matter of Re Basten and Others and Commissioner of Taxation [2007] AATA 1128. The Tribunal is satisfied that the issues for determination on the review of the decision can be adequately determined in the absence of the parties.
3.      The applicant’s circumstances and contentions in these applications are identical to those considered by the Tribunal in Re Basten (supra). Having regard to the evidence and submission in that matter it is appropriate that the decision there should apply to this applicant for the reasons set out therein and the decision in Re Princi and Other and Commissioner of Taxation [2007] AATA 1119.
I certify that the 3 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B H Pascoe, Senior Member.
Signed:         ......(Sgd. Ms R Riberi).................
  Associate
Date of Hearing  Heard on the Papers
Date of Decision  13 April 2007
Solicitor for the Applicant          Mr D Romano
Wilson & Atkinson

Solicitor for the Respondent Mr T Burrows
Australian Government Solicitor

CaseChat Overview and Summary

In the case of Kho versus the Commissioner of Taxation, the taxpayer, Kho, sought to challenge the Commissioner's decisions that disallowed certain deductions claimed in relation to the Northern Rivers Tea Tree Oil Projects. The dispute came before the Administrative Appeals Tribunal, which was tasked with determining whether the deductions claimed were allowable under the Income Tax Assessment Act 1936.

The central legal issue before the Tribunal was whether the deductions claimed by Kho for the Northern Rivers Tea Tree Oil Projects were allowable expenses under the Act. Specifically, the Tribunal needed to determine if these deductions were of a capital nature or if they represented actual cash outlays that were not capital in nature, and thus allowable as deductions. Additionally, the Tribunal was required to consider the Commissioner’s determination under section 177F of the Act.

In reaching its decision, the Tribunal found that the deductions claimed by Kho were partly allowable and partly not allowable. The Tribunal determined that the deductions represented by actual cash outlays that were not of a capital nature were allowable. However, the excess over these amounts was not allowable. The Tribunal concluded that the Commissioner's decisions should be varied accordingly, and these matters should be remitted to the Commissioner for the issuance of amended assessments.

The Tribunal ordered that the decisions under review be varied to the extent of allowing as a deduction in each of the relevant years, the amounts that represented actual cash outlays of the applicant which were not of a capital nature. The Tribunal also directed that the excess over these amounts should not be allowed as a deduction. The Tribunal further directed that the Commissioner issue amended assessments to reflect these changes.

Orders of the court

The Tribunal varies the decisions under review to the extent of allowing as a deduction in each of the relevant years so much of the deductions claimed in relation to the Northern Rivers Tea Tree Oil Projects as were represented by actual cash outlays of the applicant which were not of a capital nature with a determination under s 177F of the Income Tax Assessment Act 1936 that the excess over such amounts is not an allowable deduction and the Tribunal remits these matters to the respondent with a direction to issue amended assessments to give effect to this decision.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established