mdroth/huggingface-course_section-5_zst huggingface dataset:
Case: Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428
Outcome: followed
An examination of the character of the advantage sought is assisted by asking two questions: (1) what was the Prepayment really paid for? and (2) is what it was really paid for, in truth and in substance, a capital asset?: Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 at 454 and Sun Newspapers Ltd at 359-360. The advantage must be identified and characterised. The answer to those questions is not assisted by an analysis of the contractual right or rights secured under the contract, as distinct from the activity itself: see FCT v Raymor (NSW) Pty Ltd (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 at 648. As Dixon J said in Hallstroms , the answer: "...depends on what the expenditure is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process." See also Citylink (High Court) at [148] (per Crennan J) (with whom Gleeson CJ, Gummow, Heydon and Callinan JJ agreed). 94 The fact that the rent was paid by way of a lump sum does not detract from the fact that rent was paid to secure the use of the Premises for the period to which the payment related. Unlike the vendors in Cliffs International and Colonial, here the State retains title to that part of the profit-yielding structure from which Star City derives its income; the Premises were merely made available for use by SHCP for the duration of the Primary Rental Period. In addition to not receiving title to the Premises at the end of the lease term, SHCP received no option to purchase (whether at a below-market price or otherwise), and it was not suggested that 99 years constitutes all or a major portion of the life of the Premises.
Case: Commissioner of Taxation (Cth) v Broken Hill Pty Co Ltd (2000) 179 ALR 593
Outcome: considered
Instead, the payment secured the use of the Premises for the purposes of generating income from the casino. There was no allegation and could be no allegation that the Prepayment of rent was a sham. The two leases (the Construction Lease and the Freehold Lease) were necessary and existed, the rent was an agreed amount, was payable and was paid. Although labels can never be determinative ( Jupiters Ltd v Deputy Commissioner of Taxation [2002] FCAFC 206 ; (2002) 118 FCR 163 at [26] ; South Australian Battery Makers at 655 and Commissioner of Taxation (Cth) v Broken Hill Pty Co Ltd (2000) 179 ALR 593 at [36]), the Prepayment was in this case, as it was described a prepayment of rent.
Case: Commissioner of Taxation v Citylink Melbourne Ltd (2006) 228 CLR 1
Outcome: applied
The differences in language between the two sections are not material: s 1-3 of the 1997 Act ; the Explanatory Memorandum to the Tax Law Improvement Bill 1996 at 42; and Commissioner of Taxation v Citylink Melbourne Ltd (2006) 228 CLR 1 at [90] (" Citylink (High Court) ").
Case: Commissioner of Taxation (Cth) v South Australian Battery Makers Pty Ltd [1978] HCA 32 ; (1978) 140 CLR 645
Outcome: considered
This distinction between acquisition and use was articulated by Dixon J in Sun Newspapers : " whether on the one hand [the payment] is a capitalized sum payable by deferred instalments or on the other hire or rent accruing de die in diem, or at other intervals, for the use of the thing " (363). More recently, the test was re-stated by Stephen J in his dissenting judgment in Cliffs International Inc v FCT [1979] HCA 8 ; (1979) 142 CLR 140 at 160 where his Honour said: "The important distinction between ... [recurrent capital outgoings] ... and instances of leases of land or the licensing of patents is that in those cases rent or royalties are paid for the right to occupy or use the property or rights of another. But here the vendors, upon exercise of the option, retained nothing and the taxpayer thereafter made no use of anything to which the vendors retained any claim." See also Gibbs ACJ in Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd [1978] HCA 32 ; (1978) 140 CLR 645 at 655.
Case: Darling Casino Ltd v New South Wales Casino Control Authority [1997] HCA 11 ; (1997) 191 CLR 602
Outcome: cited
Thirdly, even if the letter were to be considered as part of some relevant factual matrix, it would not assist in resolving the question of the proper construction of the Occupational Licence Agreement. The letter was an attempt by Star City to gain leverage in its bargaining with the CCA in circumstances where it was the preferred candidate for the grant of the casino licence and, if successful, would be required to pay the Prepayment. The letter was an attempt by Star City to secure repayment of the Prepayment if a possible legal challenge to the grant of such a licence, by an opposition bidding consortium associated with the late Mr Kerry Packer, had been successful. Such a challenge was made although it was unsuccessful: Darling Casino Ltd v New South Wales Casino Control Authority [1997] HCA 11 ; (1997) 191 CLR 602. Negotiations of this nature are evidence of no more than the expectations of the parties and cannot be used to construe the meaning of the written agreement: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51 ; (1979) 144 CLR 596 at 606 and Codelfa at 352.
Case: Duke of Westminster's Case [1936] AC 1
Outcome: cited
Moreover, even if the "surrounding circumstances" or "background" were examined, they do not alter the identification of, or the character of, the advantage sought by the Prepayment. The three documents referred to in [100] above cannot be said to constitute the " whole factual matrix of which the [Leases and the Occupational Licence Agreement] forms part ": FCT v Cooling (1990) 22 FCR 42 at 51-53 citing Duke of Westminster's Case [1936] AC 1. The documents by their nature and content do not form part of the factual matrix. None of the documents was sent by one contracting party to any other contracting party or was executed by the contracting parties. I considered the letter sent by Star City to the NSW Treasurer on 13 December 1994 in pars [61] to [63] above. The issues identified in relation to that document apply equally to the 19 April 1994 and 27 April 1994 letters. Moreover, even if the documents did form part of the factual matrix, they form just that only part. It is not open to either party to pick and choose from the factual matrix.
Case: EA Greenwood (NSW) Pty Ltd v FCT 80 ATC 4039; (1980) 10 ATR 571
Outcome: followed
Whether the scheme identified by the Commissioner is a scheme within the meaning of s 177A is a question of fact: Walters v Commissioner of Taxation [2007] FCA 1270 at [59] - [60] . Where there is no evidence of an express agreement or arrangement, the question is whether an inference as to the existence of a scheme can be drawn from all the facts proved: EA Greenwood (NSW) Pty Ltd v FCT 80 ATC 4039 at 4041-2; (1980) 10 ATR 571 at 573-574 citing Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 10 ATR 128 (Full Court of the Federal Court).
Case: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (No 2) [2004] HCA 55 ; (2005) 218 CLR 471
Outcome: followed
Finally, the Commissioner's reference to and reliance upon the parties' prior and subsequent conduct is misplaced. Where, as here, the language in context is not ambiguous, the Court may not look at the prior and subsequent conduct of the parties to interpret the Occupational Licence Agreement: Administration of Papua and New Guinea v Daera [1973] HCA 59 ; (1973) 130 CLR 353 at 446 (per Gibbs J); Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 348 (per Mason J) and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2 ; [1974] AC 235 at 261; cf Sinclair, Scott &amp; Co Ltd v Naughton [1929] HCA 34 ; (1929) 43 CLR 310 at 327; Farmer v Honan [1919] HCA 13 ; (1919) 26 CLR 183 at 197. Such conduct cannot be used to generate disputes about the meaning of unambiguous terms. Such an approach would be inconsistent with the " general test of objectivity [that] is of pervasive influence in the law of contract" : Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (No 2) [2004] HCA 55 ; (2005) 218 CLR 471 at [31] - [36] and, in particular at [34] quoting Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 (per Gleeson CJ).
Case: Farmer v Honan [1919] HCA 13 ; (1919) 26 CLR 183
Outcome: considered
Finally, the Commissioner's reference to and reliance upon the parties' prior and subsequent conduct is misplaced. Where, as here, the language in context is not ambiguous, the Court may not look at the prior and subsequent conduct of the parties to interpret the Occupational Licence Agreement: Administration of Papua and New Guinea v Daera [1973] HCA 59 ; (1973) 130 CLR 353 at 446 (per Gibbs J); Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 348 (per Mason J) and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2 ; [1974] AC 235 at 261; cf Sinclair, Scott &amp; Co Ltd v Naughton [1929] HCA 34 ; (1929) 43 CLR 310 at 327; Farmer v Honan [1919] HCA 13 ; (1919) 26 CLR 183 at 197. Such conduct cannot be used to generate disputes about the meaning of unambiguous terms. Such an approach would be inconsistent with the " general test of objectivity [that] is of pervasive influence in the law of contract" : Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (No 2) [2004] HCA 55 ; (2005) 218 CLR 471 at [31] - [36] and, in particular at [34] quoting Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 (per Gleeson CJ).
Case: FCT v Cooling (1990) 22 FCR 42
Outcome: followed
Moreover, even if the "surrounding circumstances" or "background" were examined, they do not alter the identification of, or the character of, the advantage sought by the Prepayment. The three documents referred to in [100] above cannot be said to constitute the " whole factual matrix of which the [Leases and the Occupational Licence Agreement] forms part ": FCT v Cooling (1990) 22 FCR 42 at 51-53 citing Duke of Westminster's Case [1936] AC 1. The documents by their nature and content do not form part of the factual matrix. None of the documents was sent by one contracting party to any other contracting party or was executed by the contracting parties. I considered the letter sent by Star City to the NSW Treasurer on 13 December 1994 in pars [61] to [63] above. The issues identified in relation to that document apply equally to the 19 April 1994 and 27 April 1994 letters. Moreover, even if the documents did form part of the factual matrix, they form just that only part. It is not open to either party to pick and choose from the factual matrix.
Case: FCT v Mochkin [2003] FCAFC 15 ; (2003) 127 FCR 185
Outcome: followed
That the series of steps identified must constitute of itself one and only one "scheme", "plan" or "arrangement" (see ss 177A(3) and (5) and FCT v Consolidated Press Holdings Ltd [2001] HCA 32 ; (2001) 207 CLR 235 at 254 [52] and 264 [96]) is made clear by the fact that the dominant purpose under s 177D of the 1936 Act is usually determined at the time the scheme is entered into: FCT v Mochkin [2003] FCAFC 15 ; (2003) 127 FCR 185 at [45] ; Vincent v FCT [2002] FCAFC 291 ; (2002) 124 FCR 350 at 372-373. In other words, the scheme must be identified and the identified scheme must exist from the outset.
Case: FCT v Payne [2001] HCA 3 ; (2001) 202 CLR 93
Outcome: discussed
The sections contain two "positive limbs": outgoings are deductible to the extent that they are incurred in gaining or producing assessable income (the first limb) or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income (the second limb): Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation [1949] HCA 15 ; (1949) 78 CLR 47 at 57; FCT v Payne [2001] HCA 3 ; (2001) 202 CLR 93 at 98; Fletcher v Federal Commissioner of Taxation [1991] HCA 42 ; (1993) 173 CLR 1 at 16-17 and John Fairfax &amp; Sons Pty Ltd v Federal Commissioner of Taxation [1959] HCA 4 ; (1959) 101 CLR 30 at 40. The sections also relevantly contain one "negative limb": outgoings are not deductible to the extent that they are outgoings of capital or of a capital nature. 127 That the series of steps identified must constitute of itself one and only one "scheme", "plan" or "arrangement" (see ss 177A(3) and (5) and FCT v Consolidated Press Holdings Ltd [2001] HCA 32 ; (2001) 207 CLR 235 at 254 [52] and 264 [96]) is made clear by the fact that the dominant purpose under s 177D of the 1936 Act is usually determined at the time the scheme is entered into: FCT v Mochkin [2003] FCAFC 15 ; (2003) 127 FCR 185 at [45] ; Vincent v FCT [2002] FCAFC 291 ; (2002) 124 FCR 350 at 372-373. In other words, the scheme must be identified and the identified scheme must exist from the outset.
Case: FCT v Raymor (NSW) Pty Ltd (1990) 24 FCR 90
Outcome: discussed
An examination of the character of the advantage sought is assisted by asking two questions: (1) what was the Prepayment really paid for? and (2) is what it was really paid for, in truth and in substance, a capital asset?: Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 at 454 and Sun Newspapers Ltd at 359-360. The advantage must be identified and characterised. The answer to those questions is not assisted by an analysis of the contractual right or rights secured under the contract, as distinct from the activity itself: see FCT v Raymor (NSW) Pty Ltd (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 at 648. As Dixon J said in Hallstroms , the answer: "...depends on what the expenditure is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process." See also Citylink (High Court) at [148] (per Crennan J) (with whom Gleeson CJ, Gummow, Heydon and Callinan JJ agreed).
Case: Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 10 ATR 128
Outcome: cited
Whether the scheme identified by the Commissioner is a scheme within the meaning of s 177A is a question of fact: Walters v Commissioner of Taxation [2007] FCA 1270 at [59] - [60] . Where there is no evidence of an express agreement or arrangement, the question is whether an inference as to the existence of a scheme can be drawn from all the facts proved: EA Greenwood (NSW) Pty Ltd v FCT 80 ATC 4039 at 4041-2; (1980) 10 ATR 571 at 573-574 citing Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 10 ATR 128 (Full Court of the Federal Court).
Case: Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65 ; (1953) 88 CLR 492
Outcome: applied
The Occupational Licence Agreement recorded the agreement obliging Star City to pay the Prepayment. Star City was "definitively committed" to the outgoing, the Prepayment: Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65 ; (1953) 88 CLR 492 at 506. That outgoing was incurred by Star City in its capacity as the holder of the Casino Licence entitling it to operate the Casino for which it required premises from which to conduct that activity. The Prepayment was thus an outgoing incurred by Star City in gaining or producing assessable income under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act . 80 Subject to the next issue, there was no dispute between the parties that, if the Prepayment was an outgoing incurred by Star City in gaining or producing assessable income under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act , then a proportion of the Prepayment was allowable as a deduction from the assessable income of Star City for each year of income in the Primary Rental Period in accordance with s 82KZM of the 1936 Act : see [5] above. 81 In relation to the "negative limb" of s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act , the Commissioner submitted that even if the Prepayment was an outgoing incurred by Star City in gaining or producing assessable income, the Prepayment was on capital, not revenue, account and therefore not deductible under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act . This argument also fails.
Case: Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd [1978] HCA 32 ; (1978) 140 CLR 645
Outcome: considered
This distinction between acquisition and use was articulated by Dixon J in Sun Newspapers : " whether on the one hand [the payment] is a capitalized sum payable by deferred instalments or on the other hire or rent accruing de die in diem, or at other intervals, for the use of the thing " (363). More recently, the test was re-stated by Stephen J in his dissenting judgment in Cliffs International Inc v FCT [1979] HCA 8 ; (1979) 142 CLR 140 at 160 where his Honour said: "The important distinction between ... [recurrent capital outgoings] ... and instances of leases of land or the licensing of patents is that in those cases rent or royalties are paid for the right to occupy or use the property or rights of another. But here the vendors, upon exercise of the option, retained nothing and the taxpayer thereafter made no use of anything to which the vendors retained any claim." See also Gibbs ACJ in Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd [1978] HCA 32 ; (1978) 140 CLR 645 at 655.
Case: Federal Commissioner of Taxation v Spotless Services Ltd &amp; Anor [1996] HCA 34 ; (1996) 186 CLR 404
Outcome: followed
As Gummow and Hayne JJ said in Hart at [52]: "There is no doubt that 'tax laws affect the shape of nearly every business transaction' ( Frank Lyon Co v United States (1978) 435 US 561 at 580, cited in Spotless [1996] HCA 34 ; (1996) 186 CLR 404 at 416). But as was said in the joint reasons in Spotless (at 416) "A particular course of action may be, to use a phrase found in the Full Court judgments, both 'tax driven' and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Pt IVA , a person entered into or carried out a 'scheme' for the 'dominant purpose' of enabling the taxpayer to obtain a 'tax benefit' . (Emphasis added.)" Always the question must be whether the terms of the Act apply to the facts and circumstances of the particular case." 134 In addition, even if one or more of the schemes was capable of being a scheme for the purposes of Part IVA , Star City did not obtain a tax benefit in relation to it. The Commissioner contended that in determining the answer to that question, it was necessary to construe and apply Pt IVA according to its terms: Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34 ; (1996) 186 CLR 404 at 414 and Federal Commissioner of Taxation v Hart [2004] HCA 26 ; (2004) 217 CLR 216 at [51] . So much may be accepted. 148 Section 177D(b) is not directed at attributing a purpose to "the scheme": Hart at [63]. The test of purpose is objective. Actual subjective purposes are irrelevant: Hart at [65]. And if there is more than one purpose, the question is whether the taxation benefit purpose was the " ruling, prevailing or most influential purpose" : Spotless at 416.
Case: Frank Lyon Co v United States (1978) 435 US 561
Outcome: referred to
As Gummow and Hayne JJ said in Hart at [52]: "There is no doubt that 'tax laws affect the shape of nearly every business transaction' ( Frank Lyon Co v United States (1978) 435 US 561 at 580, cited in Spotless [1996] HCA 34 ; (1996) 186 CLR 404 at 416). But as was said in the joint reasons in Spotless (at 416) "A particular course of action may be, to use a phrase found in the Full Court judgments, both 'tax driven' and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Pt IVA , a person entered into or carried out a 'scheme' for the 'dominant purpose' of enabling the taxpayer to obtain a 'tax benefit' . (Emphasis added.)" Always the question must be whether the terms of the Act apply to the facts and circumstances of the particular case."
Case: GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1990) 170 CLR 124
Outcome: considered
The classic test for resolving the distinction between capital and revenue is that stated by Dixon J in Sun Newspapers Ltd v Federal Commissioner of Taxation [1938] HCA 72 ; (1938) 61 CLR 337 at 363: "There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment." See also Citylink (High Court) at [147] and GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1990) 170 CLR 124 at 137.
Case: Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634
Outcome: followed
An examination of the character of the advantage sought is assisted by asking two questions: (1) what was the Prepayment really paid for? and (2) is what it was really paid for, in truth and in substance, a capital asset?: Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 at 454 and Sun Newspapers Ltd at 359-360. The advantage must be identified and characterised. The answer to those questions is not assisted by an analysis of the contractual right or rights secured under the contract, as distinct from the activity itself: see FCT v Raymor (NSW) Pty Ltd (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 at 648. As Dixon J said in Hallstroms , the answer: "...depends on what the expenditure is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process." See also Citylink (High Court) at [148] (per Crennan J) (with whom Gleeson CJ, Gummow, Heydon and Callinan JJ agreed).