Commissioner of Taxes (QLD) v Camphin

The Commissioner of Taxes (Queensland) appealed to the High Court of Australia from a decision of the Supreme Court of Queensland. The dispute concerned whether a sum of £8,320 paid for an option to purchase the residue of a lease was taxable income under Queensland's Income Tax Acts 1924 to 1933. The taxpayer, Otto Camphin, had granted this option to Wintergarden Theatre Ltd. for the specified consideration, with payments to be made by weekly instalments.

The central legal issue before the High Court was whether the grant of an option to purchase personal property, for which valuable consideration was paid, constituted a "sale" of that personal property within the meaning of section 10(2) of the Income Tax Acts. This section provided for the taxation of net gains or profits arising from the sale of any personal property. The Commissioner contended that the £8,320 was taxable income, either in full or as received by instalments, as it represented a profit from a sale.

The High Court, affirming the decision of the Supreme Court of Queensland, held that the grant of an option, even for valuable consideration, does not amount to a sale of the underlying property. While acknowledging that such an option creates an equitable interest in the property for the optionee, the Court reasoned that this equitable interest is a new right created by the option agreement, not a transfer of a pre-existing proprietary right from the grantor. The grantor does not cease to be the owner of the property in the same way as a vendor in a sale. Therefore, as there was no "sale" of personal property, section 10(2) of the Income Tax Acts was not applicable. Other relevant sections of the Act were also considered and found not to apply.

The appeal was dismissed, with the High Court upholding the Supreme Court's determination that no part of the £8,320 was taxable income under the relevant provisions of the Income Tax Acts.