Case: Sun Newspapers Ltd and Associated Newspapers Ltd v Federal Commissioner of Taxation [1938] HCA 72 ; (1938) 61 CLR 337
Outcome: cited
Spriggs submitted that the management fee was, as the invoice stated, for " management and promotional services by CSM for season 2004 " and that those services were not identified. I reject that contention. A label is never determinative: Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) ATC 4659 at 4668; Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 ; Hallstroms Pty Ltd v Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 and Sun Newspapers Ltd &amp; Associated Newspapers Ltd v Commissioner of Taxation [1938] HCA 72 ; (1938) 61 CLR 337. The fee paid by Spriggs to CSM was payment for Connors of CSM negotiating a playing contract with an AFL club. The playing contract facilitated the generation of income of both Football Payments and Additional Services Payments. CSM negotiated each of Spriggs' AFL playing contracts. That is not surprising. Mr Shinners from AFLPA said that it is rare for a player to negotiate his own playing contract and he estimates 90% of AFL players currently have an accredited agent. Consistent with the terms of the Representation Agreement, Connors from CSM also negotiated the activities that generated or produced all of Spriggs' income from "Additional Services". 65 The classic test for resolving the distinction between capital and revenue is that stated by Dixon J in Sun Newspapers Ltd 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 Federal Commissioner of Taxation v Citylink Melbourne Limited [2006] HCA 35 ; (2006) 80 ALJR 1282 at [147] and GP International Pipecoaters Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia [1990] HCA 25 ; (1990) 170 CLR 124 at 137. 66 An examination of the character of the advantage sought is assisted by asking two questions: (1) what was the management fee really paid for? and (2) is what it was really paid for, in truth and in substance, a capital asset?: Colonial Mutual 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 Federal Commissioner of Taxation v Raymor (NSW) Pty Ltd [1990] FCA 193 ; (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms 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 at [148] (per Crennan J) (with whom Gleeson CJ, Gummow, Heydon and Callinan JJ agreed).