The Nature of Expenditure (3) – Sharpcan’s Case (3)

Understanding the High Court's Decision on Gaming Machine Entitlements

Case Background: The Commissioner assessed the taxpayer based on the cost of Gaming Machine Entitlements (GMEs), resulting in assessable income. The taxpayer objected, leading to a review by the Administrative Appeals Tribunal (AAT), which favored the taxpayer. The Commissioner appealed to the Full Federal Court (FFC), which upheld the AAT's decision. Finally, the Commissioner appealed to the High Court (HC).

High Court's Decision: On October 16, 2019, the HC unanimously overturned the FFC's decision. It ruled that the taxpayer was entitled to a deduction under S.8-1 for the GMEs' cost outright or over five years under S.40-880.

Nature of Payments: The HC determined that the payment for GMEs was capital expenditure, not deductible under S.8-1. It viewed GMEs as enduring assets necessary for conducting gaming activities. The purchase price constituted a once-and-for-all outgoing for acquiring an enduring asset, not periodic license fees.

Observations by the High Court: The HC emphasized that the purchase price for GMEs provided enduring advantage, distinguishing it from periodic license fees.

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• The Nature of Expenditure (1) - Sharpcan’s Case (1)
• The Nature of Expenditure (2) – Sharpcan’s Case (2)
• The Nature of Expenditure (4) – Sharpcan’s Case (4)
• The Nature of Expenditure (5) – Sharpcan’s Case (5)