Fct V Whitfords
Business Income:
The major issues: 1) Is this a hobby or a business? 2) If it’s a business, is it Australian? 3) What was the scope of the business? Was the transaction a profit making scheme? 4) Is the receipt income or capital? 5) Where is it from if the company is not Australian?
Question 1: is there a business or primary production?
Definition: DIV995-1:
It is any profession, trade, employment, vocation or calling, but does not include the occupation as an employee.
Usual characteristics: TR 97/11 * Significance of the commercial activity * Purpose and intention of the taxpayer in engaging in the activity * Profit intention * Regularity of activity * Activity is or will be profitable …show more content…
They want to exploit the land * NOT assessable
Scottish Australian Mining Co Ltd V FCT * 3rd mining company * After full use of the land, they subdivided and sold it * No intention to make a profit by reselling it * This is considered to be a process of realizing capital because the land can no longer be used
FCT v Whitfords Beach Pty Ltd- the fishing shack * The case was very similar to Scottish Mining BUT! They transformed from a company which simply holds the land for domestic purpose for the shareholder to one that engage in commercial venture to make profit! * Despite it was originally bought for recreational purposes, after the transformation, it’s a different story! * Assessable!
After Whitfords, the case of property development
Statham v FCT: Passive v Active * The taxpayer was a trustee for someone who was doing farming. That person was developing the land for sell. After his death, they were granted permission to subdivide the land * Found: they were forced sub divide the land- not in the business of subdividing the land * they didn’t even advertise the land for sale i.e. they were not …show more content…
* A scheme can be profit making even if the dominant purpose isn’t! * they bought the property for 2 purposes: work/sell sand + sell the land afterward for a good price * Hence, if your intention is just 1%, it’s still a profit making scheme! Even if the land was compulsory resumed by the gov.
FCT v Myer Emporium Ltd * Parents lend $ to associates * Myer claimed there’s no profit made because they are playing around with the internal structure of the corporation * Also argue that they are not in a business of lending $ * They got the right to receive interest and wanted to resale it for profit!
After Myer: 2 cases of lease incentives
FCT v Cooling- the solicitor and AMP * They moved partly for the reason of the incentives * It formed part of their business activity and was a significant transaction because they are getting incentive payments! * They can choose to pay less rent and get a smaller tax deduction or pay more and get the incentive. In this case, the latter one was chosen
FCT v Montgomery: another
The major issues: 1) Is this a hobby or a business? 2) If it’s a business, is it Australian? 3) What was the scope of the business? Was the transaction a profit making scheme? 4) Is the receipt income or capital? 5) Where is it from if the company is not Australian?
Question 1: is there a business or primary production?
Definition: DIV995-1:
It is any profession, trade, employment, vocation or calling, but does not include the occupation as an employee.
Usual characteristics: TR 97/11 * Significance of the commercial activity * Purpose and intention of the taxpayer in engaging in the activity * Profit intention * Regularity of activity * Activity is or will be profitable …show more content…
They want to exploit the land * NOT assessable
Scottish Australian Mining Co Ltd V FCT * 3rd mining company * After full use of the land, they subdivided and sold it * No intention to make a profit by reselling it * This is considered to be a process of realizing capital because the land can no longer be used
FCT v Whitfords Beach Pty Ltd- the fishing shack * The case was very similar to Scottish Mining BUT! They transformed from a company which simply holds the land for domestic purpose for the shareholder to one that engage in commercial venture to make profit! * Despite it was originally bought for recreational purposes, after the transformation, it’s a different story! * Assessable!
After Whitfords, the case of property development
Statham v FCT: Passive v Active * The taxpayer was a trustee for someone who was doing farming. That person was developing the land for sell. After his death, they were granted permission to subdivide the land * Found: they were forced sub divide the land- not in the business of subdividing the land * they didn’t even advertise the land for sale i.e. they were not …show more content…
* A scheme can be profit making even if the dominant purpose isn’t! * they bought the property for 2 purposes: work/sell sand + sell the land afterward for a good price * Hence, if your intention is just 1%, it’s still a profit making scheme! Even if the land was compulsory resumed by the gov.
FCT v Myer Emporium Ltd * Parents lend $ to associates * Myer claimed there’s no profit made because they are playing around with the internal structure of the corporation * Also argue that they are not in a business of lending $ * They got the right to receive interest and wanted to resale it for profit!
After Myer: 2 cases of lease incentives
FCT v Cooling- the solicitor and AMP * They moved partly for the reason of the incentives * It formed part of their business activity and was a significant transaction because they are getting incentive payments! * They can choose to pay less rent and get a smaller tax deduction or pay more and get the incentive. In this case, the latter one was chosen
FCT v Montgomery: another