High Court: Forestry Bond Payments Not Taxable Income

OUTCOME: Allowed

High Court of Australia BARWICK CJ, [NAME], STEPHEN and Murphy JJ [NAME] v Commissioner of Taxation (Cth)

ORDER Order The questions asked in the case stated are answered as follows:— (1) Are the amounts received by the appellant during the year ending 30 June 1973 from the [COMPANY] with respect to the bond and covenants or any one or more of the said amounts income in the hands of the appellant and therefore assessable against the appellant under s 25 of the Income Tax Assessment Act 1936 (as amended)? Answer: No. (2) Are the amounts received by the appellant during the year ending 30 June 1973 from the [COMPANY] with respect to the bond and covenants or any one or more of the said amounts not income in the hands of the appellant and therefore not assessable against the appellant under s 25 of the said Act? Answer: Yes. (3) Are the said amounts or any one or more of them assessable income in the hands of the appellant being profits arising from the carrying on or carrying out of a profit-making undertaking or scheme under s 26(a) of the said Act? Answer: No. (4) Are the said amounts or any one or more of them not assessable income in the hands of the appellant not being profits arising from the carrying on or carrying out of a profit-making undertaking or scheme under s 26(a) of the said Act? Answer: Yes. Remit case to the Supreme Court of South Australia for determination in accordance with the answers given. Commissioner to pay appellant's costs of the case stated. [APPELLANT] CJ

This appeal was argued with the appeal of [NAME] v [NAME] (1975) 5 ATR 785. There is no real difference in the facts of the two cases as would make any part of my reasons in the appeal of [NAME] v [NAME] inapplicable to this appeal. Accordingly, it will suffice to narrate the significant facts in this appeal, the result of which will be governed by the judgment in [APPELLANT].

In 1930 and 1936, the appellant, [APPELLANT], applied for a Forestry bond of the 1931 series issued by the company on prospectuses dated 1 November 1929 and 1 November 1935 respectively. The first and second bonds were similar in their terms to the 1928 series bond and the 1936 series bond respectively of the [NAME]. The provisions of the two trust deeds which were similarly entered into by the company with the two persons nominated as trustees, in respect of the two bonds of the 1931 bond series, were the same in relevant respects as those of the two deeds in respect of the 1928 series and 1936 series bonds respectively of the [NAME]. In respect of both 1931 series bonds, the appellant received payments almost yearly from and including the year 1947 to the year 1974 which totalled $1593.08, which included a sum of $34.06 payment in respect of the repurchase by the [COMPANY] to which the first bond of the 1931 bond series related. Apart from the sum of $34.06, the sums paid to the appellant represented the shares appropriate to the two bonds held by him for the thinning and felling of the timber on the plantation to which the two 1931 bond series related and perhaps, though the matter is not expressly evidenced, in relation to the second 1931 series bond, for any use made of the land for grazing.

The total cost to the appellant of the two bonds in the 1931 bond series was $160.

In 1936 the appellant applied for a Forestry bond of the 1936 series issued by the company. This bond was in similar terms to those of the 1936 series bond of the [NAME], as were the provisions of the trust deed between the company and two nominated trustees.

In respect of this bond in the 1936 bond series, the appellant received in almost every year from and including the year 1956 to and including the year 1974 amounts which totalled $391.35, being the proceeds of the thinning and felling of the plantations and perhaps including proceeds of any use made of the land for grazing. The cost to the appellant of the bond in the 1936 bond series was $65.

In 1960, the appellant had transferred to him pursuant to the terms of a will a 1949 series Forestry bond issued by the company, for which [NAME] had applied in 1949. All instalment payments had been paid by [NAME] and the appellant had received all the distributions in every year from and including the year 1966 to and including the year 1973. These amounts, which totalled $83.30, were the proceeds of the thinning and felling of the plantations and perhaps including the proceeds of any use made of the land for grazing.

The respondent included in the assessable income of the appellant for the year ending 30 June 1973 the sums of $22, $94.80 and $10, being the amounts received by the appellant in that tax year in respect of the two bonds in the 1931 bond series, of the bond in the 1936 bond series and of the bond in the 1949 bond series respectively.

For the reasons which I have expressed in [NAME], the questions in the stated case, which correspond exactly with the questions asked in [NAME], should be answered favourably to the taxpayer.

[NAME] J

The facts in this case do not differ materially from those in [NAME] and I would answer the questions in the stated case in the same way.

Gibbs J

This case is indistinguishable from [NAME] v [NAME] and the questions asked in the stated case should be answered accordingly.

[NAME] J

I would answer the questions asked in this stated case in a sense favourable to the taxpayer. The facts do not differ in a material sense from those in [NAME], in which I have agreed with the reasons for judgment of the Chief Justice.

[NAME]

The same questions arise in this case as in [NAME] v [NAME] and the same answers should be given on the stated case.