Thiel v Commissioner of Taxation [1990] HCA 37

High Court of Australia Mason C.J. Brennan, Dawson, Gaudron and McHugh JJ. Thiel v Commissioner of Taxation [1990] HCA 37

ORDER Appeal allowed with costs. Set aside the orders of the Full Court of the Federal Court and in lieu thereof order that the appeal to that Court be allowed. Set aside the orders of Franklyn J. and in lieu thereof order that the appeal to the Supreme Court of Western Australia be allowed. Remit the assessment to the respondent to be varied in accordance with the judgment of this Court. Liberty to the appellant to apply within fourteen days of this order with respect to the costs of the proceedings in the Supreme Court of Western Australia and the Full Court of the Federal Court.

Cur. adv. vult.

The following written judgments were delivered:—

Aug. 22 Mason C.J., Brennan and Gaudron JJ.

The facts and the relevant provisions of the agreement made between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income ("the Agreement") are set out in the reasons for judgment of McHugh J.

The central question in the appeal concerns the interpretation to be given by an Australian court to the words "profits of an enterprise of one of the Contracting States" in Art. 7 of the Agreement.

The key terms "profits" and "enterprise" are not defined in the Agreement, although Art. 3(1)(f) defines "enterprise of one of the Contracting States" to mean "an enterprise carried on by a resident" of Australia or Switzerland, as the context requires. Further, Art. 3(2) states:

In the application of this Agreement by one of the Contracting States, any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes to which this Agreement applies. The expression "the taxes to which this Agreement applies" includes Australian income tax: Art. 2(1)(a).