Murray v Federal Commissioner of Taxation [1921] HCA 1; (1921) 29 CLR 134 (2 March 1921)

The taxpayer is the executor of William Murray, who was resident and domiciled in England. The testator held shares in companies incorporated in England, where the central management and control abide. He also held shares in a company incorporated in Queensland, where the management and control abide. These companies carry on business in Australia and derive their main income from sources within Australia. By reason of the incomes so derived and incomes from other sources the companies were enabled to declare dividends, and these dividends were payable and paid to the testator in England. The dividends, we may take it, were declared by the English companies in England and by the Queensland company in Australia.

The Commissioner of Taxation assessed the taxpayer as executor in respect of so much of the dividend of the respective companies for certain years as bore to the whole dividend the same proportion that the profits derived by the company from sources in Australia bore to the total profits of the company (see Income Tax Assessment Act 1915-1916, secs. 14 (b), 10). It was said, first, that such a tax was not within the competence of the Federal Legislature, and, secondly, that persons not resident in Australia were not, on a proper interpretation of the Income Tax Assessment Act, within its terms. It is unnecessary for the purpose of this case to discuss the full extent of the Commonwealth power of taxation, but this Court in Wienholt's Case[1] recognized that the power subsisted if the subject matter of the tax was within the territory. Here it was said that, though the source of income of the companies was Australian, that of the testator was not, because the dividend was made or was payable in England, and his right originated there and could not be said to be derived directly or indirectly from any source in Australia.

The same argument was used in Nathan's Case, but it did not succeed. "When the company," as was said in Nathan's Case[2], "has made its profits, though no individual corporator can lay claim to any portion of them, every corporator has an interest in them. He can prevent their diversion to any purpose inconsistent with the bargain he has made, and if the corporation by its proper officers determines to divide them and does divide them, the individual shareholder's rights with respect to them do not then simply originate; they come to fruition in the final act, that has been aimed at from the beginning. The dividend he receives is an aliquot part of the fund divided; the fund itself is the source of the part that he receives, and if on analysis the fund is derived from various sources, some of which are within Australia and some outside Australia, he is, according to the provisions of the Act, liable or not liable to taxation in respect of it accordingly. The Act treats a dividend from profits arising in Australia as also arising in Australia."

The interpretation of the Act is not open to doubt. The tax is to be levied upon incomes derived directly or indirectly from sources within Australia. The taxpayer must then be the person who receives such an income. There is no reason for excepting a non-resident, and we find none in the Act (secs. 14, 10 and 3). Indeed, there are several provisions relating to absentees (see secs. 3, 18 (k), 19, 28).

The questions stated for the opinion of the Court are answered as follows:—(1) (a) Yes; (1) (b) Yes. (2) (a) Yes; (2) (b) Yes. (3) No. (4) It is not necessary to answer this question.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] [1915] HCA 49; 20 C.L.R., 531.

[2] 25 C.L.R., at pp. 197-198.

High Court of Australia

Murray v Federal Commissioner of Taxation [1921] HCA 1; (1921) 29 CLR 134 (2 March 1921)

HIGH COURT OF AUSTRALIA