Coglan v Federal Commissioner of Taxation

This case concerned an appeal by Michael John Coglan against an assessment for war-time profits tax by the Federal Commissioner of Taxation for the financial year 1917-1918. The dispute arose from the Commissioner's inclusion of profits realised by the appellant from his extensive purchases and sales of wheat scrip or certificates. The appellant, a farmer and grazier, had commenced these transactions as an investment to meet a mortgage obligation, but they evolved into a series of operations involving approximately £95,000 worth of scrip and yielding a profit of around £20,000.

The primary legal issue before the court was whether the appellant's numerous transactions in wheat scrip constituted the carrying on of a "business" within the meaning of the War-time Profits Tax Assessment Act 1917-1918. The appellant contended that these were merely investments, not a trade or business. A secondary issue, raised as an alternative ground of appeal, concerned the calculation of profits, specifically whether appropriate allowances for interest on borrowed moneys and on the appellant's own capital used in the transactions should have been made.

Starke J. held that the appellant's transactions in wheat scrip amounted to carrying on a business. The court reasoned that the series of operations, the scale of the transactions, and the clear intention to profit from dividends or market appreciation indicated a profit-making scheme rather than a passive investment. The court applied the principle that "business" or "trade" under the Act implies a series or repetition of acts in carrying out a scheme for profit-making. While the Commissioner succeeded on the main issue, the court also found that the assessment was excessive due to the lack of an allowance for interest. The assessment was therefore remitted to the Commissioner to make necessary alterations, particularly regarding interest charges, and the appeal was adjourned.