Taxation and Income Statutory Income
Assessable income=ordinary income + statutory income. Ordinary income: income deriving from the courts (s6-5)
Negative propositions: items that are not income by ordinary concepts:
1.Amounts not convertible into money :In Tennant v Smith (1892) free accommodation provided to a bank manager was held not to be ordinary income because building could not be sub-let and the benefit thereby converted to money. In FCT v Cooke & Sherden (1980) an incentive prize offered by a manufacturer was not income of the winning retailers because it was not transferable and so not convertible into money. 2.Capital does not have the character of income: For tax law purposes we need to distinguishing income and capital for several reasons: a) ordinary concepts notion of income does not include capital; [see below] b).general deductions [and some specific deductions, eg: repairs] specifically excludes deductions for capital outlays c) capital receipts may generate capital gains CGT; concessional tax treatment; the gain might be discounted by 50%. d) trust distribution of corpus [capital] is not assessable income • In general terms it may be stated that capital receipts and profits arising from the mere realisation of a capital asset are not income but where what is done is truly the carrying on of a business, the proceeds will be on revenue account: California Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159; Commr of Taxation v Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363. 3Mere gifts : This proposition is grounded in Hayes v FCT (1956): a voluntary payment from A to B prima facie is not income; but that presumption will not apply when the payment is in substance a product of services 4.Proceeds of gambling and windfall gains : Punting: Martin’s case, a ‘keen punter’ not carrying on a business as might be the case with an owner/breeder of racing stock and would be for a bookmaker. So, a successful punter not assessable on winnings - Evans – an
Negative propositions: items that are not income by ordinary concepts:
1.Amounts not convertible into money :In Tennant v Smith (1892) free accommodation provided to a bank manager was held not to be ordinary income because building could not be sub-let and the benefit thereby converted to money. In FCT v Cooke & Sherden (1980) an incentive prize offered by a manufacturer was not income of the winning retailers because it was not transferable and so not convertible into money. 2.Capital does not have the character of income: For tax law purposes we need to distinguishing income and capital for several reasons: a) ordinary concepts notion of income does not include capital; [see below] b).general deductions [and some specific deductions, eg: repairs] specifically excludes deductions for capital outlays c) capital receipts may generate capital gains CGT; concessional tax treatment; the gain might be discounted by 50%. d) trust distribution of corpus [capital] is not assessable income • In general terms it may be stated that capital receipts and profits arising from the mere realisation of a capital asset are not income but where what is done is truly the carrying on of a business, the proceeds will be on revenue account: California Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159; Commr of Taxation v Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363. 3Mere gifts : This proposition is grounded in Hayes v FCT (1956): a voluntary payment from A to B prima facie is not income; but that presumption will not apply when the payment is in substance a product of services 4.Proceeds of gambling and windfall gains : Punting: Martin’s case, a ‘keen punter’ not carrying on a business as might be the case with an owner/breeder of racing stock and would be for a bookmaker. So, a successful punter not assessable on winnings - Evans – an