Kratzmann v Commissioner of Taxation (Cth)

High Court of Australia Menzies, J Kratzmann v Commissioner of Taxation (Cth)

ORDER Order Appeal allowed in respect of assessment for the year ending 30 June 1960 to exclude therefrom as assessable income of the taxpayer any profit upon the purchase and sale of land at Cavill Avenue, Surfers Paradise. Assessment remitted to Commissioner for amendment in accordance with this order. Appeal otherwise dismissed. Menzies, J

This is an appeal to the court from a decision of the Board of Review confirming the Commissioner's assessment of the taxpayer, Noel Austin Kratzmann, to income tax for the years ended 30 June 1959 to 30 June 1966 and to the disallowance of the taxpayer's objection thereto with what is now an immaterial exception in respect of the year ended 30 June 1960.

Although there were a number of objections to a number of assessments, the whole matter before the Board of Review and in the court has, perhaps irregularly, been treated as one appeal.

There are three matters to be determined:—

1. Whether the taxpayer was assessable upon a profit made by buying land in Surfers Paradise in June 1958 for £19,415 and selling it in December 1959 for £25,000.

2. Whether the taxpayer was entitled to deductions from assessable income of sums of £990, £1538 and £3264 expended by him in legal expenses in the years ended 30 June 1964, 1965 and 1966 respectively.

3. Whether the taxpayer was entitled under s 63 of the Income Tax Assessment Act to a deduction of £26,219 13s 11d from his assessable income for the year ended 30 June 1963 in respect of bad debts written off as such in his books in November 1963.

The Commissioner contended that the land at Surfers Paradise was bought by the taxpayer as part of an undertaking (1) to establish a company limited by shares to which the taxpayer would transfer the land in return for shares; (2) to attach to particular blocks of shares in the transferee company the right to occupy certain parts of a building to be erected on the land, ie to provide for units based not upon strata titles but upon share holding in a company owning the land; (3) to arrange for the taxpayer's company, NA Kratzmann Pty Ltd, to erect upon the land a building costing about £150,000 to be known as Kratzmann House and to comprise shops, offices and flats; (4) to obtain from some financial institution a loan to cover the major part of the expenditure involved in carrying out the project; (5) to recoup the costs of the project by the allotment or sale of blocks of shares to persons wanting units in Kratzmann House; and (6) to retain the remaining shares and the rights of occupation of units attached thereto for himself.