Langford v Commissioner of Taxation [1954] HCA 54

High Court of Australia Webb J. Langford v Commissioner of Taxation [1954] HCA 54

ORDER The appeals are allowed, the re-assessments for the years ended 30th June 1947 to 1951 inclusive set aside and the original assessments restored, and the assessment for the year ended 30th June 1952 varied by excluding therefrom the appellant taxpayer's winnings from betting. The respondent commissioner will pay to the appellant his costs of the appeals.

Cur. adv. vult.

The following written judgment was delivered by:—

Oct. 28 Webb J.

These are six appeals against the disallowance of objections to an assessment and re-assessments of income tax. Five are in respect of re-assessments for the years ended 30th June 1947 to 1951 inclusive, and the sixth is in respect of the assessment for the year ended 30th June 1952. During these six years the appellant taxpayer was successively licensed bookmaker, hotel manager and hotel proprietor at Mackay in North Queensland. He was a licensed bookmaker from May 1946 to March 1947, when he became manager and licensee of an hotel, and as such could not carry on the business of bookmaking.

In his return of income for each of the six years he disclosed winnings from betting on racehorses, but not as assessable income, except such winnings as were the proceeds of "hedging" bets made while he was a licensed bookmaker. It is a practice of bookmakers to make "hedging" bets when they consider they are too heavily loaded with bets on particular horses. This practice is incidental to bookmaking, and the winnings from such bets are ordinarily returned as assessable income. However, it was contended by the commissioner that all winnings from betting should have been included in the returns as assessable income because, so he claimed, they were earnings of a business of betting carried on even after the taxpayer had ceased to be a licensed bookmaker. This contention was based on the admitted fact that throughout the six years the taxpayer had placed bets with bookmakers for others as well as for himself, and in all cases took the responsibility of settling with those bookmakers, who knew only the taxpayer in these transactions. There were about twenty-five such bookmakers in different towns in North Queensland, and the taxpayer had before-hand to make arrangements with them, with the co-operation of other bookmakers who knew the taxpayer to be trustworthy, to accept the bets which usually were made through the telephone. The extent of the taxpayer's operation is indicated by the telephone fees paid by him for calls, which ranged from £104 to £484 annually. However, the taxpayer did not receive any commission from the persons for whom he placed bets, although one, Mrs. Abrahams, was a turf commission agent, who received commission from her clients at the rate of one shilling for each pound of the stake, and another a bookmaker, Kerrish. Mrs. Abrahams carried on business in Brisbane where she was employed by southern bookmakers and others to place bets on horses racing in the southern capitals, in which there were about seventy race days in the year and about twenty-one races on each day. When Mrs. Abrahams was not able to place satisfactorily all these bets herself, she sought the taxpayer's assistance and he gave it, without commission, because she, like Kerrish, was his personal friend, and because the fact that bets were being made through her in large amounts indicated that the bets were being made for those connected with, or "close to" the horses, and so was valuable information for the taxpayer as a "punter".