Defamation payout not assessable

The Full Federal Court has held that damages awarded to a company and calculated on a 'lost profits basis' were not assessable.

The taxpayer company was awarded for $844,624 in damages against the defendant for publishing false and misleading statements as to the nature and quality of laser eye surgery services provided.

The Court held that even though the damages were based on the anticipated net income that the taxpayer had lost from surgical procedures not performed as a result of the defamatory publications, the damage was to the corporation's reputation which is part of what enables it to earn money. An injury to that reputation diminishes its capacity to earn because it reduces the corporation's ability to induce others to do business with it.

The Court said that an award of damages for that injury is therefore no different from an award for the loss of an arm or any other injury impairing earning capacity.

Published : 18 January 2010