AL Hamblin Equipment Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 1

High Court of Australia Stephen J. AL Hamblin Equipment Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 1

ORDER Order accordingly.

Cur. adv. vult.

Stephen J. delivered the following written judgment:—

1974, Jan. 31 Stephen J

These four appeals, which with the agreement of the parties I have heard together, concern the assessability of sums which the Commissioner has included in the respective appellants' assessable incomes and the origins of which are to be found in certain dealings in earth-moving equipment which the appellants have undertaken.

The evidence discloses certain features of the business of earth-moving contracting which are probably not restricted to the present appellants and which aid in an understanding of the rather complex facts of this case. The very expensive motorised equipment required by earth-moving contractors engaged in major civil engineering contracts is frequently acquired in the first instance by finance companies at the instance of contractors and then leased or let out on hire purchase to the contractors; in these appeals I am, in most instances, concerned with leases rather than with hire purchase agreements. The form of these leases contemplates a disposal of the equipment by sale by the lessor following the expiration of the term of the lease. If the price thus realized is less than a predetermined sum, known as the "residual value", the former lessee, the contractor, must make good the deficiency; presumably this residual value reflects the anticipated depreciation in value of the equipment during the term of the lease, assuming no more than reasonable fair wear and tear.

A contractor not intending to seek renewal of such a lease at the expiration of its term may either simply allow the term to expire, the lessor then selling the equipment, perhaps for less than the residual value, or may prefer, instead, to negotiate a purchase of the leased equipment before the expiry date of the term at what is described, somewhat loosely, as the "pay-out figure", being the sum of residual value and any future rental payments less some allowance for accelerated payment of these. Leases usually confer no right of purchase but this can, it seems, readily be arranged with lessors and results in a termination of the lease and the vesting of title to the equipment in the contractor.