Cases - Summary Income Tax Law PDF

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relevant cases for mid semester exam ...

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Miller v FCT Joachim v FCT Levene v IRC FCT v Applegate FCT v Jenkins Bywater investments v CoT Henderson v FCT

Arthur Murray v FCT

To work out in each test use fact and degree (residence test) Resident according to ordinary concepts (TR98/17) the person’s family, business and social ties when can show adopted another permanent place abode resident unless at end of year 1 employment show no plans of returning Carries on business in Aus and central mgmt. and control in Aus  Any untaxed amounts are now taxed using provisions of Capital Gains Tax  Change method to calculate taxable income  Change must occur at start of financial year  Professional ACCT firm (>295 people) = accruals basis  Small professional practise = cash basis  The uncollected fees earned in a prior year cannot be included in the assessable income of the year  Derivation of income when prepayment occurs  Amounts received in advance are not regarded as income

Placer pacific management v FCT

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Expense of earlier year deductable in later year when the event that gave rise to the expense occurred in an earlier year

W Neville and Co Ltd v FCT

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Expense is still deductable in the current financial year even though it results in a reduction of expenses in future years Claimed redundancy expense as a deduction Payment must not be capital in nature i.e. used to buy plant

  Steel v DCT

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Expenses may be deductable even though no income is derived at the time expense is incurred

FCT v James flood

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Provision for future payment not deductible as no actual liability at time of making the provision Doesn’t have to be paid but requires a liability to meet the payment

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FCT v Cooke and Sherden Payne v FCT Eisner v Macomber

holidays are not cash convertible so not ordinary income Frequent flyer points  rent from investment property is income  Property appreciation is usually capital

Keily v FCT FCT v Dixon

– Government aged pension is ordinary income  Top up payments for joining the army was ordinary income

Coward v FCT

Compensation for loss of income earning ability NOT ordinary income  Need to separate if compensation was lost earnings or loss of earning capacity

Sommer v FCT

Brown v FCT Laidler v Perry

Property received as a reward for service was assessable: Christmas bonus paid to employees in the form of a voucher which can be redeemed for goods was ordinary income:

Scott v FCT

Whether the gift was expected: Expected receipts are more likely to be ordinary income:

FCT v Blake

Whether the gift consists of a lump sum or regular payment: if it consists of regular payments it is more likely to be ordinary income Whether the receipts have already been remunerated for his or her services. If so, this makes the voluntary payment less likely to be ordinary income Windfall gains in the form of chance winnings or prize, which primarily depend on luck, are therefore not ordinary income BUT if result of a business activity, degree of personal exertion and skill Outweighs the element of chance, ordinary income Professional sportspersons prize Mrs Brent was paid for interviews about her husband’s criminal behaviour, this was ordinary income Payment to help reduce effect of inflation on pension payments, this was not ordinary income as it is not a product of past employment  Sign-on Fees = ordinary income Is there an intention to make a profit or genuine belief that a profit will be made Is the activity of the same kind and carried on in a similar way to that of the ordinary trade? Is the activity organised in a businesslike manner? What is the size or scale of the activity? 1. small scale goat – breeding operation a business 2. Not all indicators in Ferguson case above have to apply

Hayes v FCT

Babka v FCT Kelly v FCT

Brent v FCT FCT v Harris

Pickford v FCT Stone v FCT Thomas v FCT Riddle v FCT FCT v JR Walker

Ferguson v FCT

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Indicators of a business Repetition and regularity, maybe one has to start with one Appropriate record keeping Full time job is inconsistent with carrying on a business Size of operation and amount of capital looked at relevant to type of activity  Activities more than prep to start future business

Trautwein v FCT

1. gambling part of business of horse racing 2. Since he currently bred horses and the factor of: size of bets, systematic organised approach, committed substantial time and money to betting and employed others

Martin v FCT

1. – Gambling not a business even though associated with horse breeding 2. Not conducting a business but pursuing a recreational past time as he used to breed horses

Evans v FCT

1. gambling not a business due to a lack of systematic approach 2. He was just lucky

Spriggs v FCT Softwood pulp and paper Ltd v FCT

Professional team sportspeople are carrying on a business 2.If play full time, have manager and can easily change clubs  – feasibility study not a commitment to start a business  Expense not deductable therefore  E.g. if got a grant now it would not be assessable income

Memorex Pty Ltd v FCT

 sale of leased equipment was within the scope of a business  Sale of leased equipment was part of the normal proceeds of the computer business

FCT v Myer Emporium

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isolated or extraordinary transaction will be ordinary income if one of two strands met (we only look at first strand) The first strand – Must satisfy three requirements 2. There was a business operation or commercial transaction  If extraordinary transaction this is automatic  If isolated will be when transaction is entrepreneurial in nature 3. There was a profit-making intention upon entering transaction  Need not be dominant or sole intention  Must have this when buying the asset  If when selling doesn’t matter 4. The profit was made by means consistent with the original intention  The way profit is made is consistent with initial profit-making intention

McCurry v FCT

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first strand of Myer applied to an isolated transaction Building the house and etc was commercial in character Had intention of profit when they bought it

FCT v Whitfords Beach Pty Ltd

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proceeds held to be ordinary income One – off transaction and not existing business then isolated transaction If the developer didn’t buy and existing shareholders sold profit would not be ordinary income

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Statham v FCT

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Stevenson v FCT

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Casimaty v FCT

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FCT v snowden & Wilson Pty Ltd FCT v Star city Pty Ltd

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FCT v Wiener FCT v Edwards

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Farmer who developed and sold farm land did not generate ordinary income Ex-farmer who extensively developed and sold land generated ordinary income Ex-farmer developed land only to extent necessary to gain subdivision not ordinary income Legal expenses of a capital nature not deductable Payment held to be capital based on substance rather than form Travel expenses of itinerant workers can be deducted Expenses on conventional clothing an abnormal cost can be deducted

Mansfield v FCT

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Morris v FCT John Fairfax & sons Pty Ltd v FCT Charles Moore & Co v FCT

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Lunney v FCT

FCT v Day Herald & weekly times v FCT Sun newspaper v FCT FCT v Cooper Fullerton v FCT FCT v Maddalena Broken Hill v FCT

Expenses on conventional clothing deductable (airline attendant) Expenses on conventional clothing deductible Legal expenses of a capital nature not deductable

Losses incurred in the course of producing or gaining assessable income satisfied the positive limbs of s8-1 Incurred in producing assessable income – non-deductable cost of travel from home to work Legal expenses incurred in defending improper conduct charges, not deductable Expenses for damages with respect to libel, deductible: Payment for right to use plant, non-deductable, capital in nature Deductable for additional food and drink to gain or produce assessable income, non-deductable, private and domestic Relocation expenses Child care expense Blocking a competitor’s application to operate, capital expense:...