Bray v Federal Commissioner of Taxation (No 2)

Bray, the taxpayer, appealed to the High Court of Australia against a decision of the Federal Court of Australia concerning the assessment of income tax. The dispute centred on whether certain payments received by Bray constituted assessable income under the *Income Tax Assessment Act 1936* (Cth) or were capital in nature. Gibbs J of the High Court heard the appeal.

The primary legal issue before the High Court was to determine the character of the payments received by the taxpayer. Specifically, the court had to decide whether these payments were derived from the carrying on of a business or were of a capital nature, and therefore not assessable as income. This involved an analysis of the taxpayer's activities and the nature of the receipts in question.

Gibbs J applied the established principles for distinguishing between income and capital receipts. His Honour considered the taxpayer's intention, the periodicity of the payments, and the relationship between the payments and the taxpayer's business activities. The court found that the payments were not derived from a business carried on by the taxpayer, but rather represented a capital sum received in exchange for the surrender of a right. Consequently, the payments were held to be of a capital nature and not assessable as income.