Commissioner of Taxation (Cth) v Slater Holdings Pty Ltd

I agree with the judgment of the Chief Justice. I would only add a few words to emphasize that the character of Ogg Holdings Ltd. as a company limited by guarantee and not having a share capital was such as to preclude the application of the principle laid down in Federal Commissioner of Taxation v. Blakely [33] .

Membership of the company was not an incident of any shareholding in its capital. Upon a winding up, ordinary members would be entitled under the articles of association to share in the assets available for distribution and no doubt the surplus assets would, apart from s. 47 of the Income Tax Assessment Act 1936 Cth, be capital in the hands of the liquidator as would any amount received by a member be capital in his hands: see Staffordshire Cole & Iron Co. Ltd. v. Brogan (Inspector of Taxes) [34] . Under s. 47, of course, a distribution by the liquidator in the course of a winding-up would be deemed to be a dividend paid to the member by the company out of profits derived by it. But the payment of an amount by the company when the company was clearly not being wound up could not represent a payment for property in the sense that payment to a shareholder of his proportion of the surplus assets of a company might be regarded as payment for his shareholding and the replacement of one capital asset in his hands with another. No res ceased to exist by reason of payment by the company to the taxpayer in this case.

The most that can be said is that it is a fair inference that Mrs. Slater and, if such were the case, Slater Holdings Ltd., resigned their membership of the company as ordinary members pursuant to some arrangement which involved the payment of an amount equal to about one-third of the surplus assets of the company to Slater Holdings Ltd. But the payment and the resignations were separate steps and not merely different sides of the same coin. The payment did not operate to extinguish Mrs. Slater's or Slater Holdings Ltd.'s membership of the company or their right to participate in a winding up of the company. That only occurred in the performance of the separate arrangement made, presumably, between the ordinary members of the company and not by operation of law. Federal Commissioner of Taxation v. Blakely has no application.