Moruben Gardens Pty Ltd v Commissioner of Taxation (Cth)

Procedural Posture

Income Tax Appeal / Appeal to the High Court After the Board of Review Confirmed the Assessments

Legal Issues

1. 1 ['Whether profits made on the sale of eighteen residential strata title flats were assessable under the first limb of s 26(a) of the Income Tax Assessment Act 1936-1965 as profit from property acquired for the purpose of profit-making by sale.' "Whether the taxpayer's purpose changed when the Coorey family gained control of the taxpayer so that the units were held for investment rather than sale." 'Whether the first limb of s 26(a) required substantial identity between the property acquired and the property sold, and whether that requirement was satisfied.' 'Whether profits made after erecting a building on acquired land could still be profits from profit-making by sale under the first limb of s 26(a).' 'Whether the profits also arose from carrying out a profit-making undertaking or scheme under the second limb of s 26(a).']

Ratio Decidendi

The taxpayer acquired 21 Moruben Road for the dominant purpose of making a profit by erecting a residential flat building and selling the units with strata title, and the taxpayer did not prove that this intention changed when the Coorey family gained control. The later sale of all strata units was a disposition of the same fee simple estate in land for s 26(a) purposes, notwithstanding demolition and construction of the flats, and the profit was profit-making by sale. The acquisition, construction and sale also constituted the carrying out of a profit-making scheme. The profits therefore fell within both limbs of s 26(a) of the Income Tax Assessment Act 1936-1965.

Court Disposition

Appeals dismissed with costs; assessments confirmed.

Orders

• ['Appeals dismissed with costs.' 'Assessments confirmed.']