S.N.A Group Pty Ltd v Commissioner of Taxation – deductibility of service fees between related entities

List member Richard Schulte leading Florence Chen recently appeared on behalf of the successful taxpayer in S.N.A Group Pty Ltd v Commissioner of Taxation [2025] FCA 240. At issue was whether service fees between related parties were deductible in circumstances where the agreements giving rise to the liabilities were informal. The Commissioner thought it was “profit stripping” and was not satisfied on objection that the various criteria necessary for there to be a deduction were satisfied. Except for expert evidence, the trial was conducted over five days entirely on oral evidence. Critical to the outcome was a recognition of commercial reality as compared to the Commissioner’s expectations about how taxpayers should do business. Relevantly the Court (Logan J) said “… great injustices can be visited upon those in small business … if the Commissioner does not bring to bear at the audit stage an understanding grounded in the realities of commerce.
S.N.A Group Pty Ltd v Commissioner of Taxation