Case: Watson v Secretary, Department of Family and Community Services [2003] FCA 415 ; (2003) 128 FCR 564
Outcome: followed
The contrast between the scope of the two expressions was said to be illustrated by BHP Petroleum (Timor Sea) Pty Ltd v Minister for Resources (1994) 49 FCR 155 ( BHP Petroleum ) and Watson v Secretary, Department of Family and Community Services [2003] FCA 415 ; (2003) 128 FCR 564 ( Watson ) on the one hand, and cases such as Murry ; Hope v Bathurst City Council [1980] HCA 16 ; (1980) 144 CLR 1 ( Hope ), and Ferguson v Federal Commissioner of Taxation [1979] FCA 29 ; (1979) 26 ALR 307 ( Ferguson ) on the other. 32 The decisions of BHP Petroleum and Watson also, in my view, do not support the contrast between the two expressions in s 35. 34 Watson concerned the claim of Mr Watson and his wife for benefits under the Social Security Act 1991 (Cth). Section 1075(1) provided that "if a person carries on a business, the person's ordinary income from the business is to be reduced by ... losses and outcomings that relate to the business ...". Mr Watson was refused benefits because the payments under the PIP policy were not part of his ordinary income from his financial planning business, so as to allow the reduction for the losses and outgoings of the business. Consequently, the statutory threshold for eligibility for benefits was exceeded. Mr Watson argued, in that case, that the benefits under the PIP policy had the same character as the income they replaced, particularly as (he claimed) he had to continue to work in the business or in some other remunerative employment as a prerequisite to being paid partial disability payments. Finn J at 569 upheld the conclusion that the payments under the PIP policy were not "ordinary income from the business". The contractual income was a surrogate for, and was payable because of, the reduced ordinary income from the business. The distinction drawn by Finn J is helpful in addressing the present appeal. In that regard, Finn J did not appear to place especial weight on the word "ordinary" in his reasoning. However, I do not think his Honour's views support the contrast between "business" and "business activity" which was contended for. 49 The relevant distinction which is drawn by s 35 is between assessable income from the business activity in a particular year and assessable income which is not from the business activity in a particular year. Income from a business activity must clearly have a connection with it. Beaumont J (with whom Jenkinson and Heerey JHJ agreed) in BHP Petroleum at 170-171 applied the normal sense of a starting point, source or origin. Finn J in Watson at 569 contrasted income from the business of Mr Watson and income that was a surrogate or replacement for income which might otherwise have been received. As noted above, such income may include income from incidental activities even though they are not, or not likely to be, recurrent (eg the interest on a temporary cash surplus, as in Kidston ; or the proceeds of a life insurance policy, as in Carapark ; or the cash incentive paid to take a long term lease, as in Lees and Leech . In certain circumstances, and in relation to a particular period, the assessable income of a business activity might also include for a time disability payments under a personal income protection policy. I do not need to decide that question.