Commissioner of Taxation v Stone [2005] HCA 21

HIGH COURT OF AUSTRALIA

GLEESON CJ,

GUMMOW, KIRBY, HAYNE AND HEYDON JJ

COMMISSIONER OF TAXATION APPELLANT

AND

JOANNA STONE RESPONDENT

Commissioner of Taxation v Stone

[2005] HCA 21

26 April 2005

S245/2004

ORDER

1. Appeal allowed. 2. Set aside orders 1 and 2 of the orders of the Full Court of the Federal Court of Australia made on 27 June 2003 and in their place order that the appeal to that Court is dismissed. 3. Special leave to cross-appeal granted. 4. Cross-appeal treated as instituted and heard instanter but dismissed. 5. Appellant to pay the respondent's costs of the proceedings in this Court.

On appeal from the Federal Court of Australia

Representation:

G T Pagone QC with S H Steward for the appellant (instructed by Australian Government Solicitor)

D H Bloom QC with T M Thawley for the respondent (instructed by Blake Dawson Waldron)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Commissioner of Taxation v Stone

Income tax – Income – Whether taxpayer turned her athletic talent to account for money – Whether receipt of prize money, government grants, appearance fees and sponsorship payments constitute assessable income – Whether income derived from conduct of a "business" – Whether conduct of business a relevant consideration.

Words and phrases – "assessable income", "business", "professional sport".

Income Tax Assessment Act 1997 (Cth), ss 3-1, 4-1, 4-15, 6-5(1).

Income Tax Assessment Act 1936 (Cth), s 6(1).

1. GLEESON CJ, GUMMOW, HAYNE AND HEYDON JJ. During the year ended 30 June 1999 the respondent ("the taxpayer") was a Senior Constable in the Queensland Police Service. In addition to performing her duties as a police officer, she competed during that year, as she had since before 1995, in women's javelin throwing events at national and international athletics competitions. She was very successful. In 1996 she had been a member of the Australian Olympic team at the XXVI Olympiad at Atlanta and had competed in the women's javelin event at those Games. She won the women's javelin competitions at the 1998 World Cup and at the 1998 Goodwill Games. 2. During the 1999 financial year the taxpayer received sums as prize money, as grants by the Australian Olympic Committee ("the AOC") and Queensland Academy of Sport ("the QAS"), as fees for some appearances she made, and as payments in cash or kind by sponsors. The appellant Commissioner contended that all of these sums formed part of her assessable income and assessed her to taxation accordingly. The taxpayer objected to that assessment; the Commissioner disallowed the objection. Pursuant to s 14ZZ of the Taxation Administration Act 1953 (Cth), the taxpayer appealed to the Federal Court of Australia against the disallowance of her objection. 3. At first instance, Hill J allowed[1] the taxpayer's appeal in part and ordered that the taxpayer's objection be allowed in part. The taxpayer conceded[2] at first instance that what she received as sponsorship benefits (in cash or kind) was assessable income. She disputed that the other receipts were assessable income. The primary judge found that some but not all[3] of those other receipts were rewards of or incidental to her carrying on a business and, for that reason, were assessable income. 4. The order made by the primary judge did not identify the particular respects in which the taxpayer's objection was allowed, but allowing the objection in part is consistent only with concluding that one or more of the disputed receipts was not assessable. It is not necessary to resolve any uncertainty about which receipts were held not to be assessable. It is enough to notice that the primary judge concluded[4] that the QAS grant did not "have the character of income". 5. The taxpayer, being dissatisfied with the decision of the primary judge, appealed to the Full Court of the Federal Court. That Court (Heerey, Emmett and Hely JJ) allowed the appeal in part, holding[5] that neither the sums the taxpayer received as prizes nor any of the sums received as grants were assessable income but that the appearance moneys were. (The taxpayer did not seek to depart from her concession that the sponsorship benefits she had received formed part of her assessable income.) Much of the Court's reasons focused upon whether, and to what extent, the taxpayer conducted a business. The Court concluded[6] that the taxpayer "is a career police woman, who has achieved considerable success in an athletic sporting activity for which she has been rewarded [but that she] has not been engaged in a business activity to exploit her sporting prowess or to turn her talent to account in money". 6. By special leave, the Commissioner now appeals to this Court. The taxpayer seeks special leave to cross‑appeal from that part of the judgment of the Full Court by which it was decided that appearance fees paid to the taxpayer were assessable income. 7. The Commissioner's appeal should be allowed, the orders of the Full Court except its order as to costs set aside, and in their place there should be an order dismissing the appeal to that Court. Consistent with the undertakings given at the time of the grant of special leave, the Commissioner should pay the taxpayer's costs in this Court; the costs orders made in the courts below should not be set aside or varied. The taxpayer's application for special leave to cross‑appeal should be granted, the cross‑appeal treated as instituted and heard instanter but dismissed.