The Deductibility of Fines : Considerations from Law and Policy Perspectives

Prior to the adoption of a specific statutory prohibition on the deductibility of fines for income tax purposes, Australian courts denied deductions on the basis of judicial doctrines that characterized fines as expenses incurred outside the scope of ordinary business. Later cases suggested a better rationale would be one based on public policy grounds. This paper considers the original doctrines denying a link between fines and ordinary business activities and the public policy arguments for denying deductibility of fines. It suggests both grounds are weak and denying deductions for fines is not an effective means of reinforcing the criminal or regulatory law objectives behind fines