Cooling v Commissioner of Taxation

This matter concerned an application for special leave to appeal to the High Court of Australia between Cameron Richard Cooling (the applicant) and the Commissioner of Taxation (the respondent). The dispute centred on whether certain gains made by the applicant constituted assessable income under the *Income Tax Assessment Act* or were subject to the Capital Gains Tax provisions.

The legal issues before the High Court were twofold: first, the distinction between capital and income for the purposes of income tax, and second, the operation and effect of the Capital Gains Tax provisions. Specifically, the applicant argued that the Full Federal Court had erred in its interpretation and application of the principles established in *Myer Emporium Ltd v Commissioner of Taxation*, leading to an incorrect characterisation of a disposition of a capital asset as income.

The applicant contended that the Full Federal Court's paraphrase of the *Myer* principles, particularly concerning gains made otherwise than in the ordinary course of business but arising from profit-making transactions, had broadened the definition of income in a way that was unintended by the High Court in *Myer*. The applicant argued that this interpretation could lead to the taxation of profits from the sale of capital assets, such as business machinery, as ordinary income simply because the sale was profitable, which they submitted was contrary to established principles. The court was asked to consider whether the Full Federal Court's formulation of a two-pronged test for income, encompassing gains made in the ordinary course of business and gains made from profit-making transactions outside the ordinary course of business, accurately reflected the *Myer* decision.