Case: Federal Commissioner of Taxation v Murry [1998] HCA 42 ; (1998) 193 CLR 605
Outcome: discussed
Whether a person is carrying on a business and the nature of that business involves a consideration of the activities in which that person is involved. In Hope v Bathurst City Council [1980] HCA 16 ; (1980) 144 CLR 1 , the High Court considered questions of law which raised the issue of whether the activities of the appellant amounted to "carrying on the business of grazing". The New South Wales Court of Appeal had decided, "as a matter of fact", that the appellant's use of his land, "albeit for commercial purposes and for the purpose of profit, was not significant enough to bring it within the scope of the common or general meaning of either of the words 'business' or 'industry'." Mason J, with whom Gibbs and Stephen JJ agreed, held at 8-9, that the expression, carrying on the business of grazing, denotes "grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis". A similar approach was adopted in Federal Commissioner of Taxation v Murry [1998] HCA 42 ; (1998) 193 CLR 605 , where Gaudron, McHugh, Gummow and Hayne JJ said at 626: A business is not a thing or things. It is a course of conduct carried on for the purpose of profit and involves notions of continuity and repetition of actions. 71 The evidence shows that before the critical date Lilyvale and Enterprises Australia engaged in very different activities. It is true that Lilyvale's income (on which it was liable to income tax) was sourced from the hotel, however it was the activity of Enterprises Australia that generated that income. Lilyvale's involvement in the business of the hotel was so distant from the day to day activities of the hotel that, in my view, the course of conduct carried on in the hotel, bearing in mind the notions of continuity and repetition referred to in Federal Commissioner of Taxation v Murry (see [62] above), could not be said to be the conduct of Lilyvale. 72 As mentioned above, in the pre-sale period the Management Agreement between Lilyvale and Enterprises Australia provided that Enterprises Australia would operate and manage the hotel for a period of 20 years and would also be responsible for sales and marketing. After the sale Enterprises Australia was no longer involved with the hotel, and yet the operation of the hotel continued seamlessly. It must be assumed that Lilyvale had stepped into the shoes of Enterprises Australia. To the extent that the tasks that Enterprises Australia performed before the sale, continued to be carried out after the sale, the evidence indicates that they were carried out by Lilyvale. 73 In my view the business carried on by Lilyvale in the relevant period before the share sale was not the same as the business that it carried on in the relevant period after the sale. It follows that the present application must be dismissed and the objection decision of the respondent must be affirmed. The applicant must pay the respondent's costs. I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. Associate: Dated: 10 July 2008 Counsel for the Applicant: A H Slater QC with P M Fraser Solicitor for the Applicant: Blake Dawson Waldron Counsel for the Respondent: N J Williams SC with A J O'Brien Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 26, 27 November 2007 Date of Judgment: 10 July 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/1031.html