An Australian drug dealer who dug up hundreds of thousands of dollars from his backyard to buy heroin but had the money stolen in the deal can claim a tax deduction for his losses, an Australian court has ruled.



Under Australian law, income earned from illegal activity can be subjected to income tax. The High Court of Australia ruled this week that if illegal income is subjected to tax, then losses should be deductible.


The ruling ended a 10-year battle between convicted drug dealer Francesco Dominico La Rosa and the Australian Tax Office, which argued the tax deduction was against good public policy.


Drug dealer Francesco Dominico La Rosa buried more than $164,000 in his backyard in 1995 and dug it up again to buy heroin, but had the cash stolen. La Rosa spent six years in jail for heroin import and possession.


The Australian government said on Friday it would close the tax loophole to stop other drug dealers claiming tax breaks.


"It (the court) said that this drug dealer could claim as a deduction some money that was stolen from him. If that's the state of the law as interpreted by the high court, I don't think it's very good," Treasurer Peter Costello told local radio.


"I will seek to introduce legislation to change that law," he said.