Case: Gasparin v Commissioner of Taxation (1954) 50 FCR 73 
Outcome: discussed
These cases were applied by von Doussa J (with whose reasons Jenkinson and Spender JJ agreed) in Gasparin v Commissioner of Taxation (1954) 50 FCR 73. That case concerned the question as to when income was derived from the sale of allotments of land. It was held that each allotment remained trading stock on hand until settlement. After referring to McDonald v Dennys Lascelles , Sunbird Plaza and Automatic Fire Sprinklers Pty Limited v Watson [1946] HCA 25 ; (1946) 72 CLR 435 at 463-464 (as to which case, see below), von Doussa J said at 77 that these cases reflected a general rule about unsettled contracts of sale. His Honours said that at the end of the year of income in question: ...there were no debts owing by the purchasers to the joint venturers. In each case the promise to pay the balance of the purchase price "at settlement" remained executory until settlement occurred at which time a conveyance was executed, accepted and delivered to the purchaser. Until these events there was no accrued liability on the part of the purchaser to pay the balance of the purchase price. [emphasis added] 47 These comments were made in the context of derivation of income on an accruals basis, a different though obviously cognate subject matter from the notion of incurring in s 51(1) or s 8-1. In the context of Carden's Case (Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia Ltd [1938] HCA 69 ; (1938) 63 CLR 108) and J Rowe and Son Pty Limited v Commissioner of Taxation (Cth) (1971) 124 CLR 421 and in the absence of evidence about business or accounting practice, von Doussa J said (at 79) that stress should be placed on the prominence given in both Carden and Rowe to there being a debt in existence . von Doussa J rejected the approach of the Administrative Appeals Tribunal which had seen no distinction between a sale and delivery and giving time to pay by way of credit, on the one hand, and a contract such as the one there to buy land to be paid for at settlement on the other. von Doussa J said at 79-80: With respect to the Tribunal, I am unable to agree that there is no difference in the present case from a Department store sale of articles on 30 days terms. In that example there has been a delivery of the articles sold. The contract of sale is no longer executory. A debt has accrued due; the debtor has become subject to an obligation to pay a sum certain in money even though the debt may not be payable forthwith: cf Carden at 127. [emphasis added] Notions of loss of dispositive power over the goods were also important: see Gasparin 50 FCR at 81. 48 Gasparin and the cases referred to therein are not determinative of the question as to what "incurred" means for the purposes of 8-1 of the 1997 Act. They do reveal, however, the use, in a cognate area, of the distinction between a promise in an executory contract, and the debt (that is the present obligation to pay the purchase money) accruing on settlement, whether payable then or after some agreed time if credit be given. In this context, it is important to note that von Doussa J, though dealing with the contract for the sale of land, referred to Automatic Fire Sprinklers [1946] HCA 25 ; 72 CLR 435. That case concerned a question of wrongful dismissal under wartime regulations. Nevertheless, despite this context, what was said by Dixon J at 463-464 remains important for understanding the relationship between the executory contract and the entitlement to the price of the property or services contracted for: In certain forms of executory contract where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of or reward for the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the work is not done, the relation of master and servant ceases, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance. ... 65 That said, the words of Barwick CJ in Nilsen Development 144 CLR at 623-624 using the phrase of Latham CJ in Emu Bay Railway Co 71 CLR at 606, applied by Crennan J in CityLink [2006] HCA 35 ; 228 CLR 1 that the liability must be "presently incurred and due" in the context of the liability to pay the purchase moneys for the acquisition of land are a powerful basis to conclude that the outgoing (being the payment of the purchase moneys) has not been incurred at exchange and will not be incurred until settlement. To apply McDonald v Dennys Lascelles, Automatic Fire Sprinklers, Sunbird Plaza and Gasparin, a distinction could be made between the promise to pay the purchase price as part of an executory contract and the liability to pay the purchase price which accrues, and can be seen to be due, only at settlement. Thus, it could be said that the liability to pay the outgoing is not "incurred and due"; just as the income for the seller is not derived: Gasparin 50 FCR 73. 71 In Woolcombers the taxpayer, in the year of income, entered forward contracts for the purchase of wool that had been shorn or was yet to be shorn. The standard form contracts provided for property in the wool to pass from the woolgrower to the taxpayer upon payment, being 14 days after delivery. The contract provided expressly for the possibility of the grower needing to dispose of the sheep because of drought, flood or disease. In such circumstances, failing agreement as to how many sheep to sell, the matter of disposal would be the subject of arbitration. Thus, the promise to pay for wool to be delivered in the future was made in the year of income (1988). The wool was delivered and paid for in the following year of income. An indemnity as to delivery and quality was given by the grower. In the previous 12 years, all such forward contracts, with one exception, had been completed by the growers. The contracts were to meet contracts by way of on-sales for export entered by companies related to the taxpayer. (It is to be recalled, at this point, that the principle dealt with in Gasparin and Sunbird Plaza was not limited to contracts for the sale of land. The discussion by Dixon J in Automatic Fire Sprinklers 72 CLR at 463-464 made that clear.)