Murdoch v Commissioner of Taxation [2008] FCAFC 86

FEDERAL COURT OF AUSTRALIA

Murdoch v Commissioner of Taxation [2008] FCAFC 86

INCOME TAX – lump sum paid to life tenant for a release by her of a claim of breach of fiduciary duty by trustees – claim that trustees had pursued investment policy that favoured remainderman who was also a trustee – allegation of great increase in value of corpus of trust without any exceptional increase in income, although risk to life tenant – claim by life tenant that remainderman was liable to account for profit he had made – whether lump sum paid to life tenant in settlement of her claim was income derived by her according to ordinary concepts. Held: (1) character of lump sum paid to life tenant to be characterised by character of the claim that she had given up; (2) lump sum did not bear the character of income according to ordinary concepts. Income Tax Assessment Act 1936 (Cth) s 25(1)

Allied Mills Industries Pty Ltd v Federal Commissioner of Taxation (1989) 20 FCR 288 applied Chan v Zacharia (1984) 154 CLR 178 discussed Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 cited Ex parte James (1803) 8 Ves Jun 337 (32 ER 385) discussed Federal Coke Co Pty Ltd v Federal Commissioner of Taxation (1977) 15 ALR 449 applied Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540 followed Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199 followed Federal Commissioner of Taxation v Rowe (1997) 187 CLR 266 followed Keech v Sandford (1726)Sel Cas T King 61 (25 ER 223) discussed Maguire v Makaronis (1997) 188 CLR 449 cited Phipps v Boardman [1967] 2 AC 46 discussed Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378 discussed Warman International Ltd v Dwyer (1995) 182 CLR 544 cited

ELISABETH MURDOCH v COMMISSIONER OF TAXATION

NSD 1959 OF 2007

LINDGREN, STONE AND JACOBSON JJ