1 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the Income Tax Assessment Act 1936 (ITAA 1936), will the Trustee be required to include income from the sale of Property A in calculating its assessable income pursuant to section 6-5 of the ITAA 1997 (ITAA 1997)?
Yes. Question 2 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the ITAA 1936, will the Trustee be required to include the capital gain or loss of Property A in calculating its assessable income pursuant to subsection 104-10 of the ITAA 1997? Answer No. Question 3 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the ITAA 1936, will the Trustee be required to include the capital gain or loss from the proposed sale of the Property B in calculating its assessable income pursuant to subsection 104-10(4)? Answer No. Question 4 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the Income Tax Assessment Act 1936 (ITAA 1936), will the Trustee be required to include income from the sale of the Property B in calculating its assessable income pursuant to section 6-5 of the ITAA 1997? Answer Yes. This ruling applies for the following period: Years ended 30 June 20XX to 30 June 20XX The scheme commenced on: 30 June 20XX
The trust The Trustee, an Australian proprietary company, is the trustee of the Trust. The director and secretary of the Trustee is Person A. Person A and Person B, are the shareholders of the Trustee, each holding 50% of the total shares in the Trustee. In addition to being the shareholder and director of the Trustee company, Person A is a shareholder and director of multiple companies whose interests include conducting real-estate services, holding long-term residential and commercial investments, and building and construction. Person A has extensive experience and history buying and selling properties, property development and construction. The Trustee's business The Trustee's business derives income from a mixture of revenue streams, obtaining income from both from long-term leasing of residential properties and the sale of newly constructed residential dwellings. Prior to the Development (discussed below), the activities of the Trustee's business were as follows: a. The acquisition of land and the subsequent development of newly constructed residential properties to hold as capital assets for the purpose or derivation of rental income; and
b. The acquisition of land, development and sale of newly constructed residential properties. With previous property developments, the Trustee has purchased land from land developers and constructed residential buildings on the acquired allotments. Subsequently, the Trustee either sold the properties or obtained long-term leases to generate rental income, depending on the current market conditions. The decision to lease or sell a development is contingent on ensuring a balanced income strategy for the Trustee. Prior to the Development, the Trustee's property developments had not involved land acquisition with subsequent development and subdivision. Rather, the Trustee had only previously acquired land which had already been subdivided by established land developers. The Development On XXXX, the Trustee entered into a contract to purchase a large allotment of land for $X. Settlement occurred on XXXX. On XXXX, the Council granted a planning permit to the Trustee in relation to the land of the Development.
On XXXX, the planning permit was amended by the Council. The amended permit granted the use and development of the land for the residential Property A and development of the land for the commercial Property B. Property A consists of multiple residential allotments with corresponding dwellings. Approximately half of the land at the Development was used to build Property A. The remaining land was utilised in constructing Property B. The Trustee entered into a building contract with a builder on XXXX, for the construction of the Property A. The contract price totalled $X for the building works. The construction of Property B commenced on XXXX. Lease and sale of Property B The Trustee deemed Property B to be a more suitable investment option to hold as a capital asset to generate rental income, rather than Property A, due to the potential guaranteed long-term lease (i.e. 30-year lease) when compared to the comparatively short-term nature of residential leases. Furthermore, in deciding to hold Property B, the Trustee factored in the lower outgoing costs associated with leasing a commercial property compared to the outgoings of leasing residential properties.
A lease contract for Property B was entered into on XXXX for a period of XX years. The lease agreement contained options to extend the lease for XX years from the expiry date of the initial term, and another option to extend for a further XX years after the expiry of the first option. As per the lease agreement, the lease was estimated to commence (and handover to occur) prior to, or on, XXXX. The lease contract was broken by the lessee on XXXX. The Trustee terminated the Property B lease agreement on XXXX, retained the bond and commenced the search for a new lessee. The Trustee states that it may be required to sell Property B as they cannot afford to hold the property without collecting rental income after a lessee broke a signed lease agreement prior to the completion of the construction of Property B.
In XXXX, the construction of Property B was completed and advertised for sale or lease by the Trustee's real estate agent. The Trustee states that the re-advertising of Property B to secure new lessees, after the termination of the initial lease contract, began after the completion of construction. This was due to specialised nature of Property B which was tailored to specific requirements of the original lessee. These requirements included certain room configurations for specific equipment and overall design elements which may not align with the requirements of potential new lessees. The Trustee will either sell or lease Property B depending on the best deal presented during the advertising campaign. If the Trustee finds a lessee during the advertising campaign, the Trustee will hold onto the Property B long term. Conversely, if a buyer is found for Property B, the Trustee will sell Property B without a tenant. The cost for the construction of Property B was approximately $X. Financing The finance for the Development was obtained through a combination of bank loan facilities and the Trustee's own funds, derived from profits accumulated in previous years.
The bank provided a Business Letter of Offer to finance an amount of $X with for the purpose of constructing residential buildings. This facility had a commencement date of XXXX, with a facility expiry date of XXXX. The bank also provided another loan facility, within the same Business Letter of Offer, for the purpose of refinancing the commercial property. The amount was for $X. This facility commenced on XXXX and had an expiry date of XXXX. The loan facilities from the bank were on an interest only basis with the facility principal being repayable in full on the facility expiry date, or earlier if the facility was cancelled or terminated. The sale of Property A The Trustee decided to sell all the allotments in Property A, prior their construction, as holding both Property B and Property A presented a financial challenge and the sale of Property A was needed to generate funds for the construction of Property B. All 15 allotments of Property A were contracted to be sold between XXXX to XXX and were sold off the plan.
Income Tax Assessment Act 1936 section 95 Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 6-10 Income Tax Assessment Act 1997 section 70-10 Income Tax Assessment Act 1997 section 102-5 Income Tax Assessment Act 1997 section 108-5 Income Tax Assessment Act 1997 section 104-10 Income Tax Assessment Act 1997 section 108-5 Income Tax Assessment Act 1997 section 995-1
All references are to the Income Tax Assessment Act 1997 unless otherwise stated. Question 1 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the ITAA 1936, will the Trustee be required to include income from the sale of Property A in calculating its assessable income pursuant to section 6-5? Summary The profit or gains made from the sale of the Property A is within the ordinary course of business and therefore assessable as ordinary income pursuant to section 6-5. Detailed reasoning Explanation of the Legislation Assessable income Ordinary income Section 6-5 provides that the assessable income of an Australian resident includes the ordinary income derived directly or indirectly from all sources, whether in or out of Australia. 'Ordinary income' is defined in section 6-5 to mean 'income according to ordinary concepts'. Generally, a receipt will constitute income according to ordinary concepts if it is a receipt arising out of a taxpayer's employment or in the normal scope of a taxpayer's business. In limited circumstances, gains not within the ordinary scope of a taxpayer's business may form part of ordinary income. Statutory income
Section 6-10 provides that statutory income comprises of amounts (cash and non-cash benefits) that are not ordinary income but are included in a taxpayer's assessable income pursuant to a specific provision of the Income Tax Assessment Act 1936 (ITAA 1936) or ITAA 1997. Capital receipts Not every receipt of cash or non-cash benefit by a taxpayer is ordinary income according to the legislation. Capital receipts are not ordinary income and are not assessable under section 6-5. However, section 102-5 provides that capital receipts are to be included in a taxpayer's assessable income as statutory income. Where the sale of real property is held to be a mere realisation of an asset, the profit/loss from the sale is a capital gain/loss and the CGT rules in Part 3-1 and Part 3-3 will generally apply. As such, these proceeds are not ordinary income. Whether the sale of real property is ordinary income or capital? The distinction between capital and income is important, as capital receipts may frequently have a substantially different treatment under the tax law than ordinary income, often with considerable tax concessions available for certain taxpayers or certain CGT events.
In relation to profits or gains made from the disposal of real property, these amounts can be assessed for income tax purposes in a number of ways, including: a. as ordinary income under section 6-5, where: i. the real property is held as trading stock and sold as part of carrying on a business of property development and sale; or ii. the real property is not trading stock and is sold as part of an isolated or commercial transaction that was entered into with a profit-making intention; or b. as statutory income (section 6-10) pursuant to the capital gains tax (CGT) provisions in Part 3-1 and 3-3 where the real property is neither trading stock nor the subject of an isolated profit-making scheme or undertaking and the proceeds are the mere realisation of a capital asset. Profits or gains made in the ordinary course of business The case of Californian Copper Syndicate (Limited and Reduced) v Harris (1904) 5 T.C. 159 (' Californian Copper Syndicate ') has been cited with authority in many Australia court cases as the leading case in the context of distinguishing between income and capital receipts. [1] Californian Copper Syndicate
outlines the principle that once it is established that there is a business, it then follows that the profits made in the ordinary course of carrying on that business constitute income. Consequently, to determine whether profits or gains made from the disposal of real property are made in the ordinary course of business and therefore, are ordinary income, it is necessary to establish if the vendor is carrying on a business and, if so, whether the profits or gains are made in relation to this particular business activity. Guidance on the Commissioner's view on the meaning of the term 'profits or gains made in the ordinary course of business' can be found in Taxation Ruling TR 92/3 - Income tax: whether profits on isolated transactions are income ('TR 92/3'). In TR 92/3, the Commissioner explains his view as to the application of the principles established in Federal Commissioner of Taxation v The Myer Emporium Ltd (1987) 163 CLR 199 ( Myer ). In determining whether amounts from an isolated transaction were assessable pursuant to former subsection 25(1) of the ITAA 1936, the High Court in Myer
made reference to the concept of profits or gains made in the ordinary course of carrying on a business. Paragraph 32 of TR 92/3 explains the Commissioner's view that there are two types of profits or gains which come within the terminology of 'profits or gains made in the ordinary course of a business' as provided by the High Court, being: a. a profit or gain arising from a transaction which is itself a part of the ordinary business of a taxpayer (judged by reference to the transactions in which the taxpayer usually engages); and b. a profit or gain arising from a transaction which is an ordinary incident of the business activity of the taxpayer, although not a transaction entered into directly in its main business activity. For instance, profits of insurance companies and banks on the sale of investments are generally income. Relevant to the current case is a profit or gain arising from a transaction which is part of the ordinary business activities of the taxpayer. Intention in holding an asset and changes to that intention:
Where an entity's business activities include both holding real property for the generation of rental income (long-term investment), as well as the generation of profits from the sale of developed real property, it is necessary to consider the entity's intention behind the sale in order to establish which arm of the entity's activities to which the transaction will belong. The High Court held in Whitfords Beach Pty Ltd v Federal Commissioner of Taxation (1982) 150 CLR 355 (' Whitfords Beach') that the intention for holding an asset may change through time. In Whitfords Beach there was a change of intention at the time a company holding a large parcel of land originally acquired for long-term investment, adopted a new set of articles that changed the intended usage of the land. The Court held that the profits constituted ordinary income. In Rosgoe Pty Ltd v Commissioner of Taxation (2015) FCA 1231 ( Rosgoe
), a trustee purchased two adjacent parcels of land with the original intention to develop and sell the two properties. However, this intended plan was ultimately abandoned as funding could not be secured. The trustee subsequently rented out the two properties until they were sold several years later. The Court held the properties were capital assets and the sale therefore resulted in capital gains, rather than being the sale of trading stock or sold as part of an isolated or commercial transaction that was entered into with a profit-making intention and resulting in ordinary income. It was held that this was due to a change of the original intention. Logan J emphasised that the intent at acquisition and later, on sale of the property should be considered separately and the transactions as distinct activities: When, later, the property was sold, the profit here arose not from the purchase but from the sale and because the sale was not part of the profit-making scheme the profit did not arise 'from the carrying on or carrying out' of that scheme. In McCurry v FCT (1998) 39 ATR 121 (' McCurry'
) the taxpayers, who were brothers, purchased land and constructed three townhouses upon the land. The purchase of the land was partially funded via a bank loan, with the demolition of an existing dwelling and construction of three townhouses also funded via a bank loan. The townhouses were advertised for sale prior to completion. However, no sale was achieved at that time. Subsequently, family members moved into 2 of the townhouses and the other townhouse was used partly as a storeroom for another unrelated business activity and partly as a residence by one or other of the family members on occasional weekends. After approximately a year, the property market in the relevant area had increased markedly and the townhouses were again advertised for sale, and were sold. In McCurry
, the taxpayers gave oral evidence that when the land was purchased, it was their intention to construct three townhouses for the purpose of generating rental income. The taxpayers further submitted that the townhouses were sold as a result of financial difficulties they were experiencing in relation to an unrelated business venture and loan commitments to the bank. Davies J did not accept the taxpayers' evidence as they did not demonstrate that any attempt to let the properties had been made. Moreover, Davies J stated that: The case put by counsel for the taxpayers was that, at the time of purchase of the Addison Avenue property, they intended to construct townhouses thereon but they had not made up their mind whether they would sell the units or would rent them. I accept that, when they purchased the property, Bradley and Brett McCurry [the taxpayers] had in mind as a possibility that, for a time at least, they would rent out the townhouses when completed. ...
However, I draw the conclusion that, of the two actuating factors which they had in mind, profit-making by sale or receiving rental income, the possibility of reselling the developed property at a profit was the dominant factor. In a case such as this, where the Court must examine the purpose of a transaction, the Court is entitled to have regard not only to the evidence which the taxpayers give of what they had in mind but also to the surrounding facts and to the events which actually occurred. Those events, by hindsight, can throw light upon the considerations which the taxpayer had at the time when the dealing was initiated. That which a person does is a guide to that which he had in mind to do. There are three particular facts from which I draw an inference that the predominant factor influencing the taxpayers in their project was that of making a profit. The first is that most of the moneys were borrowed moneys. As Isaacs ACJ said in Federal Commissioner of Taxation v Clarke at 251: "To transform capital, you must at least have capital to begin with".
The project did not represent an investment of surplus funds and it was likely that, at some stage, the property would have to be sold to repay to the Bank the moneys borrowed. Secondly, the units were first put on the market shortly prior to their completion, the intention being to realise the profit which had been foreseen. And the units were put back on the market only 12 months later and were sold. Thirdly, no step whatever was taken to secure tenants for the property and no inquiry as to letting the units was made. Bradley McCurry conceded that no inquiries were made to ascertain the amount that could reasonably be expected to be received from renting out the units. He conceded also that unit 1 always remained unoccupied and was never rented out.
Of course, renting and selling were not necessarily inconsistent objectives. The units when constructed could have been sold either vacant or tenanted. Ultimately, when they were sold in December 1988, the members of the McCurry family remained on in two of the units as tenants. The new owners obviously purchased the units as investments and not for their personal use. The answer that Brett McCurry gave in cross-examination that the brothers had it in mind eventually one day to make as much money as they could out of the development is a strong indication that renting out the units was seen only as an intermediate step towards achieving profit on sale at an appropriate time. Consequently, Davies J held that the taxpayers had the purpose of either resale at a profit or rental, but held that the dominant purpose was resale at a profit. As such, the resulting profit from the sale of the townhouses was income pursuant to subsection 25(1) of the ITAA 1936.
Davies J also held that the critical issue was whether the real property which gave rise to the profit was acquired in a commercial transaction or business operation for the purpose of profit-making. It was irrelevant that there was an interruption to the scheme if the profit ultimately is derived from the activity which was planned and carried out to give rise to it. It did not matter that the taxpayer had in mind two alternatives when acquiring the property provided that the possibility of making a profit by the development of the land and its resale was the predominant factor which actuated the transaction. Capital gains tax Section 102-5 provides that a taxpayer's assessable income includes their net capital gain for the income year. Section 102-5 sets out how to calculate a taxpayer's net capital gain. A CGT asset is defined in section 108-5, with note 1 indicating land and buildings are CGT assets. Division 104 sets out the CGT events that can happen to a CGT asset and section 104-10 provides that CGT event A1 occurs on the disposal of a CGT asset.
Subsection 104-10(4) provides that you make a capital gain if the capital proceeds from the disposal are more than the assets cost base or conversely you make a capital loss if the capital proceeds are less than the assets reduced cost base. Mere realisation of a capital asset: Where the sale is the mere realisation of a capital asset, the proceeds are a capital gain/loss to which the CGT rules will generally apply. These proceeds are not ordinary income. The expression mere realisation of a capital asset is used to distinguish a mere realisation from a business operation or a commercial transaction carrying out a profit-making scheme. Application to your circumstances Business activities of the Trustee: As explained above, in order for the profits/gains from the sale of Property A to be ordinary income, consideration of the business activities of the Trustee is necessary.
The Trustee states that it carries on business activities that involve acquiring land and developing new residential properties and either selling or holding the assets depending on market conditions. That is, the Trustee develops property for profit as well as holding property for long term investment, depending on the best outcome it can achieve. Consequently, it is necessary to determine under which arm of the Trustee's business activities the sale of Property A was made in order to establish whether the profits/gains are ordinary income. Profits or gains made in the ordinary course of business Considering the principles explained above, the arrangement, the intentions and decisions surrounding the arrangement indicate that Property A were sold as part of the ordinary property development business activities of the Trustee. These factors are: a. At no point in time did the Trustee attempt to make any of Property A available for rent. It did not advertise Property A for rent or undertake any other action to generate rental income from the properties.
b. By no later than XXXX, before execution of the construction contract with the builder, the Trustee decided to sell all of the allotments of Property A. Furthermore, the Trustee advertised some of the allotments for sale before signing the construction contract. c. The Trustee contracted to sell Property A between XXXX and XXXX and sold all allotments. All of the allotments of Property A were sold off the plan, prior to the completion of the construction of the properties. d. The loan facility was on a short-term basis and was repayable in full on the Final Repayment Date. Given the short-term nature of the loan, the means to service the debt was contingent on the Trustee selling Property A in order to make payment at the Final Repayment Date. Therefore, the financing acquired by the Trustee does not support an assertion that the property was intended to be held long term, rather it indicates that it was for the purpose of sale at a profit.
e. There was an expectation of the financial return from the sale of Property A to fund the development of Property B. Had Property A been leased, or otherwise made available to generate rental income, the intention to provide funding to the development of the Property B could not be achieved. Therefore, the Trustee always had the purpose of generating a profit/gain from their ordinary property development business activities. Conclusion Given the above, and the Trustee's intention that Property A were to be sold to assist in funding the construction of Property B, the proceeds from the sale of Property A are profits or gains made in the ordinary course of carrying on the Trustee's property development business. As such, the profit or gains made from the sale of Property A is ordinary income under section 6-5. Question 2 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the ITAA 1936, will the Trustee be required to include the capital gain or loss of Property A in calculating its assessable income pursuant to subsection 104-10 of the ITAA 1997? Summary
The profits or gains made from the sale of Property A by the Trustee are not a capital gains pursuant to subsection 104-10(4). Detailed reasoning As explained in Question 1, the sale of Property A was made within the ordinary course of the Trustee's business of property development. Accordingly, the profits and gains made from the sale are assessable as ordinary income pursuant to section 6-5. Therefore, the profits or gain on the disposal of the assets will not be subject to capital gains tax pursuant to subsection 104-10(4). Question 3 In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the ITAA 1936, will the Trustee be required to include the capital gain or loss from the proposed sale of the Property B in calculating its assessable income pursuant to subsection 104-10(4)? Summary The disposal of Property B is in the ordinary course of the Trustee's property development business activities. Detailed reasoning
The Trustee has advised that it will either sell or lease Property B depending on the best deal presented during the advertising campaign. If the Trustee finds a lessee during the advertising campaign, the Trustee will hold onto Property B long term. Conversely, if a buyer is found for Property B, the Trustee will sell the property without a tenant. As explained above, in order for the profits/gains from the sale of Property B to be ordinary income, consideration of the business activities of the Trustee is necessary. Business activities of the Trustee: The Trustee states that it carries on business activities that involve acquiring land and developing new properties and either selling or holding the assets depending on market conditions. That is, the Trustee develops property for profit as well as holding property for long term investment, depending on the best outcome it can achieve. Consequently, it is necessary to determine under which arm of the Trustee's business activities the sale of Property B will be made in order to establish whether the profits/gains are ordinary income. Profit or gains made in the ordinary course of business
The Trustee states that at the time of the entering into the arrangement for the construction of Property B, it intended to hold the property for the purpose of holding it for the long term and to generate rental income. Despite this contention the Trustee failed to re-advertise the property for lease within a short period time of being aware that the original lease was broken by the original lessee in XXXX. That is, it was not until XX months after the termination of the original lease in XXXX that a replacement lessee was sought. This significant delay in advertising for a replacement lessee does not appear to be consistent with the continuation of the Trustee's intention to hold Property B for producing rental income.
The Trustee's reason for the delay in re-advertising Property B for lease was due to the specialised nature of Property B which was tailored to specific requirements of the original lessee. These requirements included certain room configurations for specific equipment and overall design elements which may not align with the requirements of potential new lessee. However, the Trustee has not explained why it would be more beneficial to advertise after completion of, rather than during, the construction of Property B. At the time the original lease was terminated, some XX months prior to the completion of the construction of Property B, there could have been potential to amend the building plans or specifications to be better tailored to the specific needs of a potential lessee and let the property, and generate rental income, much sooner. This indicates that, at least at this point in time, the intention of generating rental income was no longer the dominant focus of the Trustee. Consistent with the decision in Rosgoe
, at some undisclosed date, the Trustee's intention to hold Property B on a long-term basis as a capital asset changed or, at the least, the Trustee commenced to hold the property for a dual purpose. This is demonstrated by the Trustee advertising the property for sale or lease and that the decision to sell or lease will be determined on the basis of the 'best deal available'. The following factors also indicate the Trustee's intention of profit making by sale of the property in the ordinary course of its property development business activity: a. Property B has never produced any rental income for the Trustee. b. The existence of a lease, or terminated lease, does not preclude Property B from being held for resale. Oftentimes the existence of a long-term lease on a commercial property allows the property developer to obtain a higher sale price.
c. The Trustee has previously constructed and sold residential properties for profit as part of its business activities. Although the construction of Property B was the first time the Trustee had developed and sold a commercial property, this is sufficiently similar to the construction and sale for profit of residential property to be considered part of its ordinary business activities. d. The Trustee's plans of selling or renting Property B depending on the market conditions. As Property B has been advertised for sale or lease, there is a dual intention. e. The loan facility was on a short-term basis. The loan facility was repayable in full on the Final Repayment Date, being the earlier of the facility expiry date, the facility being cancelled, terminated or otherwise ending. Therefore, the finance acquired by the Trustee does not support an assertion that the property was intended to be held long term, rather it indicates that it was for the purpose of sale at a profit.
f. No details were provided to indicate the loan was repaid before the expiry of the facility or refinanced. This indicates that in order to service the debt the Trustee was required to sell Property B to be able to make payment at the Final Repayment Date. Consistent with the principles in McCurry and Rosgoe , the intention at the time of acquisition or purchasing a property is not the sole consideration, as it is possible for the intention to change. The Trustee's intention changed when the lease contract was broken and the Trustee decided to either lease or sell Property B depending on what provides the best financial outcome. Conclusion In these circumstances, the sale of Property will occur within in the ordinary course of the Trustee's property development business. On an objective consideration of the facts, there is an intention of, or there was a change of intention to, profit from the sale. Therefore, the gain from the disposal of Property B by the Trustee would be considered ordinary income and therefore will be included in the Trustee's assessable income under section 6-5. Question 4
In determining the 'net income' of the Trust estate pursuant to subsection 95(1) of the Income Tax Assessment Act 1936 (ITAA 1936), will the Trustee be required to include income from the sale of the Property B in calculating its assessable income pursuant to section 6-5 of the ITAA 1997? Summary The proposed sale of Property B is within the ordinary course of the Trustee's business and/or the property was acquired and developed with the intention of, or the intention change to, profit making by sale. The profit or gains from the sale of the Property B will be ordinary income pursuant to 6-5. Detailed reasoning As discussed in Question 3, the proposed sale of Property B by the Trustee would be considered within the Trustee's ordinary course of business. As such, the profit on the sale of the property would be considered income according to ordinary usage. In these circumstances, the gain from the disposal of Property B by the Trustee will be ordinary income and therefore will be included in their assessable income under section 6-5. > [1] (See for example, Westfield Limited v Commissioner of Taxation (1991) 91 ATC 4234, Commissioner of Taxation (Cth) v Myer Emporium Ltd
(1987) 163 CLR 199, London Australia Investment Company Limited v Federal Commissioner of Taxation 77 ATC 4398 and CMI Services Pty Ltd v Federal Commissioner of Taxation (1990) 90 ATC 4428)