Tax Law

Ordinary income

Tennant v Cruz, (money or perhaps convertible in money)

An employee was given holiday accommodation rent free by his employer. Was this normal income? • The employee wasn't able to sublet the accommodation to anyone else, as a result could not convert this lodging into cash. • The Court said it was not ordinary income under s i9000. 25(1) (now s. 6-5) since the accommodation was not collapsible into cash. • Not really ordinary cash flow under s i9000. 6-5. FCT v Cooke & Sherden. (money or convertible into money) Soda retailers were given holidays by simply wholesalers/manufacturers pertaining to selling a particular number of soft drinks. Was this ordinary cash flow? The holidays could not be sold or used in anyone else. The holiday season were not transformable into money, therefore the 1st characteristic was not met, and therefore the holidays were not ordinary profits under t. 25(1). There is also a further rule from this circumstance. If the holiday seasons were a substitute for profits, rather than a voluntary reward, then a holiday will assume the smoothness of the cash flow it substituted. Not a joining principle using this case (Obiter Dicta).

FCT v Dixon, Periodicity, repeat and regularity/substitution principal Taxpayer left his job to enlist in the armed forces, however the army did not pay as much as his old job. Previous employer topped up his pay frequently to make up the difference. 2 of the your five judges said the obligations were judged to be imprevisto to the armed service service. Consequently ordinary cash flow. 1 judge said that the payments had been a substitute pertaining to salary in the taxpayer's ex - employment, therefore were normal income. The other two judges explained there was not any connection to an earning activity and concluded that it was not ordinary income. But the circumstance was chosen a 3-2 majority of the High Court that the invoice was ordinary income.

FCT v Harris, Periodicity, recurrence and regularity

Ex-gratia payment (voluntary) built to a retired bank manager to offset the effects of inflation on his pension. One payment only was originally planned but others were made later on. This case considered the first repayment only. Virtually all judges decided the payments were not ordinary income as the payments are not a product of past solutions. However one particular judge disagreed saying that the past employment caused the the obligations. He was inside the minority hence the payments were judged not to be normal income. Frequency and periodicity is relevant, even though not generally decisive. The decisions in Harris and Dixon turned on whether the repayment had a connection to any making activity.

FCT v Blake. Periodicity, repeat and steadiness

Similar to Harris, but frequent supplementary obligations were made and considered in the case. Held to be income (contrast with Harris). The assess in Blake agreed with all the minority assess in Harris that the obligations were ‘caused' by the previous employment. Bloggers favour the approach in Blake consequently Blake's thinking is recommended. Myer Emporium capital sixth is v income

The case engaged assignment of the income stream on a bank loan (ie interest) to a 3rd party. Myer received a lump sum for that task. High Court docket held the receipt was ordinary cash flow. Refer back to FCT v Harris & periodicity if she is not a decisive characteristic.

Mclaurin v FCT, Allsop sixth is v FCT. (capital)

Where a huge is made up of the two income and capital, although we how to start how much of every, then the entire amount can be capital

Jeff v FCT.

If there is an employment/services romantic relationship only, you can argue strongly that there is a sufficient nexus between your voluntary payment and a great earning activity, therefore it is common income beneath s. 6-5(1). If there is a great employment/services relationship and a personal relationship it is assumed that there is enough nexus until the taxpayer can prove the gift was personal.

Betting Cases:

Smith v FCT.

Jones was obviously a grazier who betted seriously and shed lots of money. Substantial...



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