Medical Technology - Expenditure on Research and Development - Preparatory Expenses - Capital or Income - Deductions - Income Tax

Goodman Fielder Wattie Ltd. v. Federal Commissioner of Taxation (1991) A.T.C. 4438 (Federal Court). The taxpayer commenced research and development of anitbodies and related substances. Hill J. held that its initial expenditure, up to the time when it decided to proceed with development and production, was of a preliminary nature and was not incurred in the course of carrying on a business, and hence was not deductible under s. 51 or s. 73A of the Income Tax Assessment Act. However, as from the time when the taxpayer definitely proceeded on the development and marketing of the substances Hill J. held that its expenditure was not preliminary, but was in the course of carrying on a new business, even although income had not yet been derived. Hence from this time rights to deductions arose under s. 73A, and possibly also under s. 51 since Hill J. was not inclined to regard the expenditure as of a capital nature.