mdroth/huggingface-course_section-5_zst huggingface dataset:
Case: Federal Commissioner of Taxation v Murry (1998) 193 CLR 604
Outcome: cited
The PIP partial disability payments received by Mr Watson for the year ended 30 June 2004 are clearly part of his assessable income: see Federal Commissioner of Taxation v Smith [1981] HCA 10 ; (1981) 147 CLR 578. That is common ground. So too is the nature of Mr Watson's business activity during that year. It was that of a financial planner, although (as he says) that required administration and regulation compliance activities, each of which did not directly result in the earning of income. That was the activity he engaged in during the financial year ended 30 June 2004, and in earlier years, for the purpose of profit: cf Commissioner of Taxation v Murry [1998] HCA 42 ; (1998) 193 CLR 605 at [54] ( Murry ). 28 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. 31 The cases referred to by senior counsel for the Commissioner about the nature of a business also do not support the contrast sought to be drawn. Murry at 604; Hope at 8-9; and Ferguson at 311 all describe in generally consistent terms what is involved in carrying on a business. They do not suggest that the activities undertaken in doing so, so that they may be called "business activities" are somehow outside or distinct from the business itself. 41 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].
Case: Ferguson v Federal Commissioner of Taxation [1979] FCA 29 ; (1979) 26 ALR 307
Outcome: cited
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. 31 The cases referred to by senior counsel for the Commissioner about the nature of a business also do not support the contrast sought to be drawn. Murry at 604; Hope at 8-9; and Ferguson at 311 all describe in generally consistent terms what is involved in carrying on a business. They do not suggest that the activities undertaken in doing so, so that they may be called "business activities" are somehow outside or distinct from the business itself.
Case: Hope v The Council of The City of Bathurst [1980] HCA 16 ; (1980) 144 CLR 1
Outcome: cited
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. 31 The cases referred to by senior counsel for the Commissioner about the nature of a business also do not support the contrast sought to be drawn. Murry at 604; Hope at 8-9; and Ferguson at 311 all describe in generally consistent terms what is involved in carrying on a business. They do not suggest that the activities undertaken in doing so, so that they may be called "business activities" are somehow outside or distinct from the business itself.
Case: Federal Commissioner of Taxation v Smith [1981] HCA 10 ; (1981) 147 CLR 578
Outcome: cited
The PIP partial disability payments received by Mr Watson for the year ended 30 June 2004 are clearly part of his assessable income: see Federal Commissioner of Taxation v Smith [1981] HCA 10 ; (1981) 147 CLR 578. That is common ground. So too is the nature of Mr Watson's business activity during that year. It was that of a financial planner, although (as he says) that required administration and regulation compliance activities, each of which did not directly result in the earning of income. That was the activity he engaged in during the financial year ended 30 June 2004, and in earlier years, for the purpose of profit: cf Commissioner of Taxation v Murry [1998] HCA 42 ; (1998) 193 CLR 605 at [54] ( Murry ). 37 Whilst that contention has a superficial attraction, I think it over-simplifies the position. The PIP policy was clearly to diminish the adverse consequences of illness or accident. The benefits under the PIP policy provided protection against income loss from the inability to fully conduct the business, and so to earn income from it. So the benefits under the PIP policy are a partial indemnity for, and as a substitute for, the reduced commission and fee income which Mr Watson suffered by reason of his illness. There is no need for a direct monetary correlation between the amount of the benefits and the foregone or lost commission and fee income: Federal Commissioner of Taxation v Smith [1981] HCA 10 ; (1981) 147 CLR 578 at 583. That does not, however, mean that the benefits under the PIP policy are part of assessable income from the business activity for the year in issue. 38 One submission of Mr Watson acknowledged that. He accepted it was necessary to take the extra step of regarding the business activity as encompassing the "related or incidental activities" which, in turn, include his "insurance activities". 39 Counsel for Mr Watson then submitted that the business activity of Mr Watson included his "insurance activities" as well as the range of other incidental administrative and professional matters referred to in [12] above. Counsel further submitted that the "insurance activities", by which he relevantly meant Mr Watson taking out the PIP policy and regularly paying the premiums on it and in the event of an insured risk occurring receiving the benefit of it, had the "significant commercial purpose" of securing a stream of income as a substitute for the business income that could be at risk if Mr Watson were injured or became ill. He also said there was a purpose of profit or the prospect of profit, because the potential benefits if an insured event occurred could be up to 75% of Mr Watson's earnings from the business and were much greater than the premiums payable from time to time. Counsel also relied upon the fact that, as the material showed, the PIP policy was taken out by many authorised representatives of National Mutual/AXA and by many other self-employed persons.
Case: Federal Commissioner of Taxation v Myer Emporium Ltd [1987] HCA 18 ; (1987) 163 CLR 199
Outcome: cited
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].
Case: Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77
Outcome: cited
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.
Case: Lees &amp; Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136
Outcome: cited
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.
Case: Warner Music Pty Ltd v Commissioner of Taxation (1996) 70 FCR 197
Outcome: cited
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.
Case: Federal Commissioner of Taxation v Dixon [1952] HCA 65 ; (1952) 86 CLR 540
Outcome: cited
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.
Case: G.P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1989) 170 CLR 124
Outcome: considered
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.
Case: Dufty v City Mutual General Insurance Ltd [1977] Qld R 94
Outcome: cited
There is an undated note taken by Mr Watson of a discussion with an officer of the insurer: Therefore, there is a requirement to work if capable. If the insured person returns to work at a reduced capacity, the income protection is replacement income (business related income). If expenses exceed other business income (ie ignoring the Income Protection benefit itself) then to sell off the business is against the intent of the insurance act and the insurance company would cease benefit until other work was obtained. In a practical sense, Mr Watson should take reasonable steps to "mitigate his loss". That obligation is one applicable to the measure of damages in all contracts. It does not apply as a term of the policy. Section 13 of the Insurance Contracts Act 1984 (Cth) implies a term that each party to an insurance contract will act towards the other party with the utmost good faith. It could be expected that Mr Watson should therefore act reasonably in relation to the business activities or employment which he chooses to undertake: Dufty v City Mutual General Insurance Ltd [1977] Qld R 94. The element of reasonableness is also explained in cases such as Fidelity and Casualty Co of New York v Mitchell [1917] AC 592 ; Pocock v Century Insurance Co Ltd [1960] 2 Ll Rep 150; and Sergent v GRE (UK) Ltd [2000] Ll Rep 1R 77. That obligation extends to an insurer in determining whether an insured was totally and permanently disabled: see Beverley v Tyndall Life Insurance Co Ltd (1999) 10 ANZ Ins Cas 61-453. Reference may also be made to regs 17 and 18 of the Insurance Contracts Regulations 1985 (Cth) and to the decision in QBE Insurance Ltd v Jande (1995) 8 ANZ Ins Cas 61-270. Ultimately, the wording of the policy is the critical element.
Case: Fidelity and Casualty Co of New York v Mitchell [1917] AC 592
Outcome: cited
There is an undated note taken by Mr Watson of a discussion with an officer of the insurer: Therefore, there is a requirement to work if capable. If the insured person returns to work at a reduced capacity, the income protection is replacement income (business related income). If expenses exceed other business income (ie ignoring the Income Protection benefit itself) then to sell off the business is against the intent of the insurance act and the insurance company would cease benefit until other work was obtained. In a practical sense, Mr Watson should take reasonable steps to "mitigate his loss". That obligation is one applicable to the measure of damages in all contracts. It does not apply as a term of the policy. Section 13 of the Insurance Contracts Act 1984 (Cth) implies a term that each party to an insurance contract will act towards the other party with the utmost good faith. It could be expected that Mr Watson should therefore act reasonably in relation to the business activities or employment which he chooses to undertake: Dufty v City Mutual General Insurance Ltd [1977] Qld R 94. The element of reasonableness is also explained in cases such as Fidelity and Casualty Co of New York v Mitchell [1917] AC 592 ; Pocock v Century Insurance Co Ltd [1960] 2 Ll Rep 150; and Sergent v GRE (UK) Ltd [2000] Ll Rep 1R 77. That obligation extends to an insurer in determining whether an insured was totally and permanently disabled: see Beverley v Tyndall Life Insurance Co Ltd (1999) 10 ANZ Ins Cas 61-453. Reference may also be made to regs 17 and 18 of the Insurance Contracts Regulations 1985 (Cth) and to the decision in QBE Insurance Ltd v Jande (1995) 8 ANZ Ins Cas 61-270. Ultimately, the wording of the policy is the critical element.