Denying tax deductions for criminals : Australia considers the options - should Australia follow the United States model?

Australia is considering enacting a "no-deductions" provision in the income tax legislation which denies all deductions if the income-producing activity to which the expense relates is illegal or criminal, in reaction to the La Rosa decision, which allowed certain deductions to a convicted drug dealer. The United States enacted a narrow no-deductions provision in 1982 which denies a deduction for the expenses incurred in drug trafficking. This article discusses the La Rosa decision and deductions for "quasi personal expenses", the US provision and the practical problems that have been encountered in applying it, the practical difficulties that could arise in Australia if it drafts such a provision, and the constitutional issues arising under the Australian Constitution. The article also considers the effectiveness of such a provision as punishment and the issue of whether such an approach could trigger claims of double punishment for the same offence.