14 (General Deductions)[1]

Gaining or producing the assessable income it must be

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gaining or producing the assessable  income it must be incidental and  relevant to that end. ... [I]t is both  sufficient and necessary that the  occasion of the loss or outgoing should  be found in whatever is productive of  the assessable income or, if none be  produced, would be expected to  produce assessable income.”  ( Ronpibon Essential character Essential character § For an outgoing to satisfy the positive  limbs it must have the essential 
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character of a “working” or “business”  expense ( Lunney ) § Courts traditionally characterise  outgoings by reference to legal rights or  advantages a taxpayer obtains from  incurring the expenditure ( Cecil Bros Phillips ) § Courts are prepared to also take  subjective criteria into account to  characterise voluntary outgoings where  the income produced is less than the  amount of the outgoings ( Ure Fletcher Necessarily incurred in Necessarily incurred in     carrying on a business carrying on a business § An outgoing is necessarily incurred in  carrying on a business if it is “dictated  by the business ends to which it is 
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directed” ( Snowden & Willson ) § “The requirement that the claimed  outgoing be ‘necessarily’ incurred in  carrying on the relevant business does  not, in the context, mean that the  outgoing must be either ‘unavoidable’ or  ‘essentially necessary’. Nor does the  word ‘necessarily’ import a requisite of  logical necessity. What is required is  that the relevant expenditure be  appropriate and adapted for the ends of  the business carried on for the purpose  of earning assessable income.”( Magna  Alloys Temporal connection Temporal connection § Losses or outgoings that are  “preliminary” to the commencement of  an income-producing or business  activity are not incurred “in the course 
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of” such activity so are not deductible  ( Softwood Pulp Griffin Goodman  Fielder Wattie ) § Provided the occasion of a loss or  outgoing can be traced to business  operations that were formerly carried on  by the taxpayer for the purpose of  gaining assessable income, loss or  outgoing is usually deductible ( Placer,  Brown, Jones ) First First     negative negative     limb – limb –     capital capital § Once and for all test:  expenditure  incurred “once and for all” is usually  capital in nature; expenditure incurred  “regularly” is usually revenue in nature  ( Vallambrossa Rubber ) § Enduring benefit test:  expenditure 
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incurred to bring into existence an asset  of a “lasting nature” is usually capital in  nature ( British Insulated & Helsby  Cables § Business entity test:  expenditure that  relates to the taxpayer’s “profit yielding 
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