Concessions and Licences

Before finding that the taxpayer’s expenditures for 10-year assignable gaming licences (“GMEs”), which it required in order to be permitted to continue using gaming machines on its hotel premises, were capital expenditures, the Court discussed the Citylink case ((2006) 228 CLR 1) in the following terms (at para. 21):

Citylink provides no support for the idea that the acquisition of the GMEs was not the acquisition of an asset of enduring advantage. As the majority in Citylink noted, the concession agreement there in issue was essentially a licence agreement "to use capital assets for the limited period of the concession". It followed, as the majority held, that concession fees under the agreement, which were payable semi-annually and calculated in part on the basis of revenue generated, were "periodic licence fees" for such use. They were not the purchase price for the acquisition of any enduring advantage, because the agreement did not confer any "permanent ownership rights" over the roads and lands which were the subject of the concession. Although the concession agreement was of 30 years' duration, that fact did not alter the character of the advantage sought by the fees payable under it.