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FCT V Whitford Beach Pty Ltd (1982)

Decent Essays

Answer no.1

The core of business activity is to gain profit. As these profits are earned form ordinary business activities, the profits are categorised as ordinary income for the business. However, there are some cases and scenarios where the business activity may include courses of actions that are not usual for the business nature. Here, we tried to find the consistency of ordinary income and the proceeds from these unusual business decisions.

At first we need to assess the characteristics for ordinary income. Ordinary income is generated from personal exertion (i.e. Salary income), property (rent, interest) and carrying out business activities. According to ITAA 1997, section 6-5 (1) , the assessable income constitutes income derived from ordinary concepts. There are some provisions listed under section 10-5 may be effect the treatment of ordinary income.

In case of FCT v Whitford Beach Pty Ltd (1982), The tax payer, a group of fisherman, acquired a land in 1954 to hold the property for domestic purpose of the shareholder. However, three companies wanted to buy the land and reselling the land for profit. Instead of buying the …show more content…

as the parent Myer Emporium would not engage into such transaction to issue loan to Myer Finance if Citicorp did not agree to take over and pay the lump sum back to the Myer Emporium. As Myer Emporium would receive interest income from the loan agreement with Myer Finance. Instead receiving the amount in periodic stream basis, the parent Myer Emporium received a lump sum from Citicorp which is assessable as income. The Californian Copper Principle was again applied by the court for the judgement in this case. Based on the general principle, such income is generated from a business activity (though it is an extra-ordinary transaction) and is consistent with ITAA 1997

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