Case: Carapark Holdings Ltd v Commissioner of Taxation [1967] HCA 5 ; (1966) 115 CLR 653
Outcome: followed
Whether particular payments in a particular year of income under an income protection policy are income from the business activity will depend upon the particular facts. In Carapark Holdings Ltd v Commissioner of Taxation [1967] HCA 5 ; (1996) 115 CLR 653 ( Carapark ), the benefits received by a holding company of an employer taken out on the life of an employee of a subsidiary company were part of its assessable income. The Court (Kitto, Taylor and Owen JJ) said at 663: ... in general, insurance moneys are to be considered as received on revenue account where the purpose of the insurance was to fill the place of a revenue receipt which the event insured against has prevented from arising, or of any outgoing which has been incurred on revenue account in consequence of the event insured against, whether as a legal liability or as a gratuitous payment actuated only by considerations of morality or expediency. The fact that it was the holding company which took out the policy and received the benefits, rather than the subsidiary employing company, did not alter that position. As that passage indicates, the purpose of the taxpayer entering into the contract of insurance which produced the payment is relevant to identifying the relationship of the payment with the business. See e.g. Federal Commissioner of Taxation v Myer Emporium Ltd [1987] HCA 18 ; (1987) 163 CLR 199 at 217; cf Murry at 626 [54]. 46 To draw that line is not to exclude from the business, or the business activities, related or incidental activities. There may be a range of income sources which qualify as assessable income from a business or from business activities even though they are in a sense incidental to its main activities. In Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77 , the Court held that the investment of surplus funds from sales of gold on the short-term money market was an incident of the taxpayer's goldmining business. That case also decided that the interest received was not, however, exempt from income tax under the then s 23(o) of the ITAA 1936 as it was not income "derived from the working of a mining property". It was not sufficiently proximate to the activities which directly generated income by gold mining. The result turned on the particular statutory provision. Other illustrations are provided by Carapark ; Lees &amp; Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 ( Lees &amp; Leech ); Warner Music Pty Ltd v Commissioner of Taxation (1996) 70 FCR 197 ; Federal Commissioner of Taxation v Dixon [1952] HCA 65 ; (1952) 86 CLR 540 and G.P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1989) 170 CLR 124. To draw that line requires an assessment of the material circumstances at the relevant time or for the relevant period. 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.