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14 (General Deductions)[1]

Force of in the course of gaining or producing and

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force of ‘in the course of gaining or producing’ and  looks rather to the scope of the operations or  activities and the relevance thereto of the expenditure  than to purpose in itself.” ( Amalgamated Zinc )
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Foundations of Taxation Law [¶14.3](c) © CCH Australia Limited Incidental and relevant” Incidental and relevant” “For expenditure to form an allowable deduction as  an outgoing incurred in 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
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Foundations of Taxation Law [¶14.3](d) © CCH Australia Limited Essential character Essential character For an outgoing to satisfy the positive limbs it must  have the essential 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
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Foundations of Taxation Law [¶14.3](e) © CCH Australia Limited Necessarily incurred in carrying on  Necessarily incurred in carrying on  a business a business An outgoing is necessarily incurred in carrying on a  business if it is “dictated by the business ends to  which it is 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
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Foundations of Taxation Law [¶14.3](f) © CCH Australia Limited 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 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 
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