Commissioner of Taxation v Sharpcan [2019] HCA 36

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  • Spazor Pty Ltd (“Spazor“) was the trustee of a trust of which the respondent was a beneficiary.
  • On 8 August 2005, Spazor purchased from Tattersall’s Ltd the Royal Hotel in Daylesford for $1,025,000.00. At the time, Spazor did not purchase 18 gaming machines at the premises but was paid a percentage of the income derived by Tattersall’s, who was the owner of the machines and an authorised gaming operator under the Gambling Regulation Act (“the Gaming Act“).
  • Eventually, Spazor bid for, and was allocated, 18 gaming entitlements. This allowed Spazor to operate 18 gaming machines for 10 years and to sell/transfer these entitlements to other venues.
  • In order to purchase these entitlements ($600,300.00), Spazor entered into an agreement with the Minister for Gaming. This agreement provided for deferred payment by instalments and forfeiture in default of payment. Spazor claimed the purchase price as a deduction under s 8-1 of the Act, claiming it was deductible and was not an outgoing on capital account.
  • Spazor appealed the decision to the AAT, who overturned the Commissioner’s decision.  The Commissioner appealed.  The Full Federal Court held that the outgoing was not on capital account. The Commissioner appealed.


  • The High Court unanimously held that the purchase price of $600,300.00 was an outgoing on a capital account. This meant that it was not deductible under s 8-1 of the Act.
  • The High Court held that the authority is clear that the test of whether an outgoing is incurred on revenue account or capital account primarily depends on what the outgoing is calculated to effect from a “practical and business point of view.” It involves identifying the advantage sought to be obtained by considering the manner which the acquisition is to be used and whether it is for an “enduring advantage” or a “periodical outlay to cover the use and enjoyment of something“.
  • After characterising the acquisition of the entitlements in line with the above test, the High Court explained that the entitlements were assets of long-term value which were purchased by Spazor as a means of generating further income from gaming. The entitlements were also necessary for the hotel’s continuing business, being a licenced hotel.

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