Magrath v Commonwealth [1944] HCA 14

Tis.

MAGRATH

THE COMMONWEALTH

HIGH COURT

(HIGH COURT OF AUSTRALIA.]

PLaInrirr ;

AND

Drrenpant,

H.C. or A. Income Tax (Cth.)}—Assessable income—External loan—Gold dollar bonds—Principal

1944. and interest payable " without deduction for any taxes" present or future, imposed a by Commonwealth or State—Bondholder resident in Commonwealth—Whether Sypyey, promise not to impose tax—Income Tax Assessment Act 1922-1934 (No. 37 of April 14. 1922—No. 18 of 1934), 8. 13—Income Tax Assessment Act 1936-1941 (No. 27 Mztnounns, of 1936—No. 69 of 1941), s. 25—Loans Securities Act 1919 (No. 25 of 1919), 8. 3. May 29. The plaintiff, who was at all material times a resident of the Commonwealth, mates Oe had since December 1929 been the holder of some bonds issued in New York A wen in 1927 by the Commonwealth of Australia as part of an external loan. The Williams JJ. bonds provided that principal and interest were payable "to bearer" in New

York in gold coin of the United States of America "without deduction for any taxes" then or at any time thereafter imposed by the Commonwealth or by any taxing authority thereof or therein, and the interest coupons attached to the bonds provided that interest was similarly payable "without deduction for any Australian taxes present or future." :

Held, by Rich, McTiernan and Williams JJ. (Latham C.J. and Starke J. dissenting), that by the bonds the Commonwealth promised the plaintiff as holder that the interest, after having been paid to him in full, would not form part of his assessable income for the purpose of Federal income tax within the meaning of the Income Tax Assessment Act 1922, and the Income Tax Assessment Act 1936, as respectively amended, or any other Income Tax Aasessment Act thereafter to be enacted although he was a resident of Australia and liable as a taxpayer within the meaning of those Acts.