LAWS4221 Case Table
Concept of Income (9 Cases)
Provision Effect
6-5 (1) Your assessable income includes income according to ordinary concepts, which is called ordinary income .
Note: Some of the provisions about assessable income listed in section 10-5 may affect the treatment of ordinary income.
(2) If you are an Australian resident, your assessable income includes the * ordinary income you * derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
(3) If you are a foreign resident, your assessable income includes:
(a) the * ordinary income you * derived directly or indirectly from all
* Australian sources during the income year; and
(b) other * ordinary income that a provision includes in your assessable income for the income year on some basis other than having an * Australian source.
(4) In working out whether you have derived an amount of * ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.
6-10 (1) Your assessable income also includes some amounts that are not * ordinary income.
Note: These are included by provisions about assessable income.
For a summary list of these provisions, see section 10-5.
(2) Amounts that are not * ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income . Note 1: Although an amount is statutory income because it has been included in assessable income under a provision of this Act, it may be made exempt
income or non-assessable non-exempt income under another provision: see sections 6- 20 and 6-23.
Note 2: Many provisions in the summary list in section 10-5 contain rules about ordinary income. These rules do not change its character as ordinary income.
(3) If an amount would be * statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in any way on your behalf or as you direct.
(4) If you are an Australian resident, your assessable income includes your * statutory income from all sources, whether in or out of Australia.
(5) If you are a foreign resident, your assessable income includes:
(a) your * statutory income from all * Australian sources; and
(b) other * statutory income that a provision includes in your assessable income on some basis other than having an * Australian source.
6-25(2) Unless the contrary intention appears, the provisions of this Act (outside this Part) prevail over the rules about * ordinary income.
Note: This Act contains some specific provisions about how far the rules about ordinary income prevail over the other provisions of this Act.
23-20? s 20(23/20?)- if receive deduction in previous income year which is refunded in subsequent year it will be assessable.
Case Name Facts Decision
LAWS4221 Case Table
Commissioner v Harris
Receiving a pension at fixed rate, high inflation at the time, pension was being eroded by inflation so chose to make gratuitous 1 off supplementary payment of
$450 as a lump sum
held by FFC payments were not periodic thus not
ordinary income
Blakes Case Retired bank employee received pension, bank paid supplementary payments to combat high inflation,
Held the supplementary payments were ordinary income and had the same character as the pension payments
Countess of Bective
Commissioner
given trust for maintenance and support of
her daughter was held that was not their
money they were just the person spending it. Must be received by and belong to the taxpayer, must have control and can't be required to be used in a particular way.
Tennent v Smith (House of Lords Decision)
Taxpayer was bank employee, was given residence at bank branch as a part of employment package, couldn’t sublet, couldn’t convert to income
Must be money or a gain convertible into money.
Held not ordinary income as not convertible.
FCT v Cooke
& Sherden
holiday could accept or refuse holiday but could not convert it to cash, irrelevant that the award stopped them from spending money.
Held not ordinary income as not convertible.
1936) 21A treats non- convertible business benefits as being
convertible and values it using "arm's length amount", what you would pay.
Meyers Case lent sum of money to subsidiary, engages in contract with CityCorp to receive lump sum payment and the subsidiary will pay the interest on the loan, Myer assigned the right to receive interest from
subsidiary in return for lump sum.
Substitution principle: Lump sum was in substitution for the interest payment would have received (income) so maintains that character.
Profit making purpose:
Entered into transaction with profit making motive, isolated transaction and in that situation the receipt is ordinary income.
McLaurin v
FCT Settlement payment for fire damage.
Included income and capital payments in undissected lump sum.
Commissioner treated a portion of it as ordinary income
HC rule the undissected lump sum received by TP could not be dissected into
income and capital components.
Allsop v FCT Received undissected lump sum for all claims against the State related to unlawful fees.
Held no particular part could be attributable to the fees, not assessable income
LAWS4221 Case Table
CSR Ltd v FCT
Received settlement for claims against insurer relating to unpaid claims for personal injury.
Held that undissected lump sum contained capital components and that should be assessed under former Part IIIA.
Personal Services Income (28 Cases)
Provision Effect
15-2 (1) Your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums * provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you (including any service as a member of the Defence Force).
(2) This is so whether the things were * provided in money or in any other form.
(3) However, the value of the following are not included in your assessable income under this section:
(a) a * superannuation lump sum or an * employment termination payment;
(b) an * unused annual leave payment or an * unused long service leave payment;
(c) a * dividend or * non-share dividend;
(d) an amount that is assessable as * ordinary income under section 6-5;
(e) * ESS interests to which Subdivision 83A-B or 83A-C (about employee share schemes) applies.
Case Name Facts Decision
FCT v Cooke
& Sherden
Carried on business selling soft drinks through home delivery. Soft drink manufacturer gifted TP a holiday.
Held tax payer did not provide service to manufacturer by buying then reselling soft drinks for purposes of former s26(e).
FCT v Dixon Employer gave voluntary payment for those who enlisted, regular payment to make the difference between their current and old salary. commissioner assessed on these payments, payments were incidental to employment so doesn’t matter who it comes from its income.
Alternatively treated under substitution principle.
Held the payments were incidental to ordinary income gained during service. Periodic, TP knew they would receive
payments if enlisted, and irrelevant that paid by different employer.
Hayes v FCT Employee and friend of Richardson, became business partner, sold and then repurchased business. Told them he would make it up to them in exchange for them selling him their shares, he made gifts of shares once business improved.
Hayes also provided Richardson financial advice which inspired but not causes the gift. Taxpayer argued there was no connection between services and the gift received and thus no assessable income.
Held the donor’s motive is relevant but not decisive, not a product or incident of employment. In part reward for the advice, would've been different if he was in the business of giving financial advice.
Held was not income as impossible to relate to any income producing activity.
