Case: Commissioner of Taxation v CityLink Melbourne Limited [2006] HCA 35 ; (2006) 228 CLR 1 
Outcome: discussed
The circumstances in which outgoings or losses will be seen as incurred in any year of income have been discussed in numerous cases. Recently, Lindgren J in Merrill Lynch International (Australia) Limited v Commissioner of Taxation [2001] FCA 1127 ; (2001) 47 ATR 611 undertook a careful analysis of the course of authority from New Zealand Flax Investments Ltd v Federal Commissioner of Taxation [1938] HCA 60 ; (1938) 61 CLR 179 to Commissioner of Taxation v Mercantile Mutual Insurance (Workers' Compensation) Ltd [1999] FCA 351 ; (1999) 87 FCR 536. Since 2001, the Full Court of this Court and the High Court has each undertaken an analysis of the relevant authorities in CityLink Melbourne Limited v Commissioner of Taxation [2004] FCAFC 272 ; (2004) 141 FCR 69 and Commissioner of Taxation v CityLink Melbourne Limited [2006] HCA 35 ; (2006) 228 CLR 1. 59 In the High Court in CityLink [2006] HCA 35 ; 228 CLR 1 , Crennan J (with whose reasons Gleeson CJ, Gummow, Callinan and Heydon JJ agreed) referred at 38 [127], without disapproval, to the synthesis essayed by Hill J in Ogilvy &amp; Mather. In her Honour's reasons (at [122]-[126]) some analysis of the jurisprudence was made upon which the respondent here relied. After referring in [122] to New Zealand Flax [1938] HCA 60 ; 61 CLR 179 and James Flood [1953] HCA 65 ; 88 CLR 492 and, in particular, to the notions of "definitely committed" and "completely subjected", her Honour referred to the reasons of Barwick CJ in Nilsen Development Laboratories Pty Limited v Federal Commissioner of Taxation [1981] HCA 6 ; (1981) 144 CLR 616. The reference to that decision is important in that the Chief Justice (with whose reasons Mason J agreed generally, and Aickin and Wilson JJ agreed (together with the reasons of Mason J)) said at 623 that the language of Dixon J in New Zealand Flax "need [ed] to be carefully perused and applied" and then went on to say the following: ...Granted that exhaustive definition of what may be denoted by the word "incurred" in s 51 (1) may not be possible, there can be no warrant for treating a liability which has not "come home" in the year of income, in the sense of a pecuniary obligation which has become due, as having been incurred in that year. Sir John Latham's language in Emu Bay Railway Co Ltd v Federal Commissioner of Taxation [1944] HCA 28 ; (1944) 71 CLR 596 at p 606 clearly enough indicates that to satisfy the word "incurred" in s 51 (1) the liability must be "presently incurred and due though not yet discharged". The "liability" of which Sir John speaks is of necessity a pecuniary liability and the word "presently" refers to the year of income in respect of which a deduction is claimed. It may not disqualify the liability as a deduction that, though due, it may be paid in a later year. That part of Sir Owen Dixon's statement in New Zealand Flax Investments Ltd v Federal Commissioner of Taxation (1938) 61 CLR, at p 207 which presently needs emphasis is that the word "incurred" in s 51 (1) "does not include a loss or expenditure which is no more than pending, threatened or expected": and I would for myself add "no matter how certain it is in the year of income that that loss or expenditure will occur in the future". The language of Crennan J in [123] can be seen to revivify this passage from Nilsen Developments [1981] HCA 6 ; 144 CLR 616 which did not form an express part of Hill J's synthesis in Ogilvy &amp; Mather , though it was referred to in Raymor . It can be seen as a reiteration, perhaps, of the fourth proposition in Ogilvy &amp; Mather supported by reference to Federal Commissioner of Taxation v Australian Guarantee Corporation Limited [1984] FCA 240 ; (1984) 2 FCR 483 , a case in which Nilsen Developments and Emu Bay Railway Co Ltd v Federal Commissioner of Taxation [1944] HCA 28 ; (1944) 71 CLR 596 were distinguished. Though Nilsen Developments was in respect of long service leave obligations in a specific statutory context, it is clear that the lack of a liability to make a payment until leave was taken or cessation of employment meant that there was no incurring of the outgoing. 65 That said, the words of Barwick CJ in Nilsen Development 144 CLR at 623-624 using the phrase of Latham CJ in Emu Bay Railway Co 71 CLR at 606, applied by Crennan J in CityLink [2006] HCA 35 ; 228 CLR 1 that the liability must be "presently incurred and due" in the context of the liability to pay the purchase moneys for the acquisition of land are a powerful basis to conclude that the outgoing (being the payment of the purchase moneys) has not been incurred at exchange and will not be incurred until settlement. To apply McDonald v Dennys Lascelles, Automatic Fire Sprinklers, Sunbird Plaza and Gasparin, a distinction could be made between the promise to pay the purchase price as part of an executory contract and the liability to pay the purchase price which accrues, and can be seen to be due, only at settlement. Thus, it could be said that the liability to pay the outgoing is not "incurred and due"; just as the income for the seller is not derived: Gasparin 50 FCR 73.