Blockey v Federal Commissioner of Taxation

The case of Blockey v. Federal Commissioner of Taxation concerned an appeal by Edward John Steriker Blockey against an amended assessment for Federal income tax for the year ending 30th June 1918. The dispute arose because the Commissioner of Taxation included Blockey's share of profits from a joint venture involving the purchase and sale of wheat scrip as assessable income, classifying it as "income from personal exertion." Blockey contended that these profits did not constitute "income" under the relevant legislation.

The High Court of Australia was required to determine whether the profits derived from the wheat scrip transactions constituted "income from personal exertion" as defined by section 3 of the Income Tax Assessment Act 1915-1921, specifically whether these profits were the proceeds of a business carried on by the taxpayer. The core legal issue was whether the joint venture, involving the purchase of wheat scrip with the intention of reselling it at a profit, amounted to carrying on a business.

The Court reasoned that the profits were indeed assessable income from personal exertion. Applying principles from established cases such as *Californian Copper Syndicate Ltd. v. Harris* and *T. Beynon & Co. v. Ogg*, the Court held that the venture was a scheme for profit-making by trading. The agreement between Blockey and his co-adventurers was to buy wheat scrip with the sole purpose of reselling it at a profit, and the transactions, spanning several months for both purchase and sale, demonstrated a series of interconnected acts with the characteristic operations of a business. The scrip was treated as stock-in-trade rather than an investment, and the capital was risked with the intention of earning a profit.

The Court unanimously answered the question posed in the affirmative, finding that the profits from the wheat scrip transactions were income derived from a business carried on by the taxpayer and thus assessable.