Wind farm tests tax laws

By Chris Thomson | posted on February 15, 2018

ON THE eve of its fifth birthday, the Denmark community wind farm has lost a test case in the Federal Court where it challenged the inclusion in its assessable tax income of more than $2 million spent on its two landmark wind turbines.

In a written judgement delivered last week, the Full Bench of the Federal Court dismissed the wind farm’s appeal against a 2017 judgment disallowing deductions it had claimed in 2013 and 2014 respectively for amounts of $747,045 and $1,271,380.

After the Commissioner for Taxation decided the amounts were assessable income, the wind farm objected, but the Commissioner disallowed the objection.

Denmark Community Windfarm Ltd Chairman Craig Chappelle told The Weekender he was disap- pointed with the appeal decision, but it was no more than a “blip on the radar” for the company.

“It means that what tax we have paid we’ve lost, it’s gone,” he said.

“The reason that we raised the case was to test the advice given to us by our tax professionals, an accountancy firm and a tax lawyer about the ambiguity of certain sections with the [Taxation Administration] Act.

“The interpretation that we got from our professional advisors was that we should not have had to pay tax on the grant that we received from the Federal Government.”

In 2011, the wind farm received a $2,487,800 grant from the Feds to fund up to 50 per cent of the cost of the farm’s two turbines. The wind farm powers 2000 homes, amounting to 55 per cent of Denmark’s annual domestic electricity demand.

“It was an argument on a technicality and we ended up losing,” Mr Chappelle said of the Federal Court ruling.

“The ATO recognised that this was a grey area that we were entering, to the extent that they helped to fund our case.

“They gave us some of the money that we claimed against costs for preparing our case, because they wanted an answer too.”

The case turned on whether the grant money was deemed to have been received by way of indemnity, in which case the Act mandated the deductions could not be made. The wind farm argued, unsuccessfully, that it was not. The Commissioner argued, successfully, that it was.

The Full Bench agreed with the primary judge that an indemnity may include money paid in respect of an outgoing in- curred by a taxpayer, and that the $2,487,800 Commonwealth grant was received as compensation for an expense incurred by the wind farm.

The wind farm, which turns five on Tuesday, was ordered to pay the Commissioner’s costs in the appeal case.

Mr Chappelle said it was possible the wind farm would have gotten status to appeal the ruling in the High Court, but the company did not intend to appeal further.

Photo: Simon Neville